Does the future of Bitcoin depend on Europe?

Chris Grundy is a self-proclaimed Bitcoin enthusiast and a radical tech fan. He currently works for Bitbond, a Bitcoin lending platform, and provides original articles for several online publications. In this article, he talks to several Bitcoin companies in Europe to discuss with them why the future of cryptocurrency and blockchain technology lies in the European continent, not in the United States.

Innovation is the essential difference between leaders and followers. Bitcoin is a great innovation, and it needs a continuously advancing legislative mechanism to fully unleash its potential. Clear and guiding policies will give Bitcoin entrepreneurs confidence. They need an outlet to vent their potential and bring Bitcoin into all aspects of life.

However, the current Bitcoin policy in the United States remains unfriendly.

US Act

The United States announced in April this year that the deadline for applying for a Bitcoin license (BitLicence) is August 8, 2015. So far, 22 applications have been confirmed. 15 Bitcoin companies in New York have ceased operations, such as Poloniex, BitFinex and Kraken have left the Bitcoin arena, and BTC Guide has decided to completely close down. Two other Bitcoin companies, ShapeShift and Xapo, have also moved their headquarters from the United States to Europe.

Connecticut has passed a controversial Bitcoin bill that would give state regulators the power to approve or deny applications for money transmitter licenses if digital currencies qualify.

In March 2014, the Texas State Securities Board sent a cease-and-desist letter to an oil exploration and production company called Balanced Energy LLC because the company accepted Bitcoin payments, which was seen as increasing risks to investors and was forced to shut down.

On the west coast of the United States, California passed a bill that requires any transaction involving digital currency to pay a non-refundable registration fee of $5,000. This fee is a high barrier for small business entrepreneurs.

Alena Vranova, partner at SatoshiLabs and founder of bitcoin wallet Trezor, said: "The barrier to entry for newcomers to the financial services industry is really too high." Therefore, Europe is more attractive for bitcoin entrepreneurs.

Why Bitcoin Needs Radical Legislation

In a recent article published on Bitcoin news outlet CoinDesk, author Jean-Louis Schlitz describes the progress of Luxembourg’s Bitcoin legislation. He explains how the Luxembourg Financial Services Commission provides basic regulatory policy to Bitcoin companies. The Commission lays out specific regulations to provide legal confidence for entrepreneurs to operate their businesses.

Luxembourg is undoubtedly the only country in Europe that provides a viable legal framework for Bitcoin companies.

Germany's financial regulator, BaFin, defined Bitcoin as a "financial instrument" in 2013, allowing entrepreneurs to find their place in the law.

Kaja Ribnikar, a senior associate at Bitstamp, said her company had a positive experience under European regulatory policy, adding: “It goes without saying that European regulators are open, inclusive and fair in their view of Bitcoin. It is clear that the policy environment in the United States is not conducive to the development of Bitcoin companies.”

Current US policy is insecure, and ongoing legislation is even more of a headache for entrepreneurs than applying for a Bitcoin license.

ChromaWay is a virtual currency wallet company based in Stockholm. Co-founder Henrik Hjelte said that his company almost moved to the United States a year ago. However, the high legal bills in the United States "scared" the team, so they decided to "settle" in Europe. "So far we have no regrets at all." He said.

Eric Larcheveque, CEO of LedgerWallet, a French company that provides smart security services for Bitcoin, believes that as long as the company remains in Europe (especially in France), it will benefit.

Mysterious US bill

The new US tax policy on Bitcoin is confusing. 77% of Bitcoin transactions are conducted in US dollars, but the United States does not recognize Bitcoin as a currency.

In early 2014, the Internal Revenue Service announced that Bitcoin should be considered property for tax purposes. However, when the federal court ruled on the Silk Road case, it treated Bitcoin as a currency.

Fair-minded observers point out that European governments are more willing to see Bitcoin as an opportunity rather than a "gimmick." In 2013, the UK drafted a customs bill to include income from Bitcoin sources in the taxable scope.

In addition, the Spanish tax authorities also exempted Bitcoin from additional taxes in April. After that, the European Court of Justice also believed that Bitcoin should be exempt from additional taxes.

ChromaWay's Hjelte is pleased with the policy, saying: "In Europe, the law determines whether innovation can be achieved. Responsive, efficient and low-cost government is key to stimulating our innovation."

Europe as Bitcoin Hub

Despite the positive impact that Europe has had on Bitcoin, there has been very little media coverage. European startups are often overlooked by their US counterparts. With only 25% of the Bitcoin network currently located in Europe, it’s no surprise that only the US is seen in this regard.

However, Europe has been instrumental in shaping Bitcoin. For example, Bitstamp is a first-generation platform for Bitcoin exchanges, which popularized KYC processing and multi-signature technology.

Other platforms include bitcoin wallet services Trezor and LedgerWallet, Bitbond and ChromaWay, and Berlin-based SatoshiPay.

Bitcoin is anti-corruption, innovative, and truly global. Its success depends on whether people use it. For innovation to continue, positive policies and regulations are needed. Bitcoin needs to let governments see its potential so that it can continue to grow at its own pace.

European regulators have realized that if Bitcoin is stifled, it would mean losing a strong economic system.

SatoshiPay CEO Meinhard Benn believes that US legislation only benefits well-funded companies, but this often inhibits innovation.

By creating a comprehensive legal framework, European countries can give entrepreneurs the confidence to innovate and fully tap the potential of Bitcoin and blockchain.