Europe vs. the United States, where is the future center of Bitcoin?

Editor's note: Chris Grundy considers himself a Bitcoin and technology enthusiast. He currently works at Bitcoin lending platform Bitbond and has published works in numerous online publications. In this article, he talks about Bitcoin companies in Europe and why the future of cryptocurrency and blockchain technology will be in Europe, not in the United States.

Innovation is the most important difference between leaders and followers. It represents subversion and a challenge to our way of life.

Bitcoin is an important innovation that requires advanced legislation to unlock its full potential. Clear and advanced legislative guidance will make it easier for Bitcoin entrepreneurs to find new use cases and bring Bitcoin to the masses.

However, in the United States, the regulatory environment for Bitcoin is not friendly.

US Market Situation

The New York State BitLicence regulation law was issued in April, and the application deadline is August 8. So far, 22 applications have been submitted, and 15 Bitcoin companies (confirmed) have withdrawn from the New York State area. Several Bitcoin companies including Poloniex, BitFinex, and Kraken have left New York City one after another, and even the mining pool BTC Guid has chosen to shut down operations.

Some companies, such as ShapeShift and Xapo, have also moved their headquarters from the United States to Europe.

In March 2014, the Texas Securities Commission terminated its relationship with oil and gas exploration company Balanced Energy LLC because the company accepted Bitcoin as payment, which the commission believed was a risk to investors.

On the West Coast, California is proposing another bill that would require any digital currency business to pay a $5,000 non-refundable registration fee. At the same time, the bill has no guarantees, whether from banks or lawmakers. This amount of money will be a considerable burden for small startups.

Alena Vranova, co-founder of SatoshiLabs, creator of the Bitcoin hardware wallet Trezor, said:

“The barriers for newcomers to get through financial services are just too high.”

So to me, Europe is becoming more and more attractive for Bitcoin entrepreneurs.

Why Bitcoin Needs Advanced Legislation

A recent article by Jean-Louis Schlitz on Coindesk describes the Bitcoin legislation in Luxembourg. The Commission de Surveillance du Secteur Financier (CSSF) provides clear regulatory legislation, giving entrepreneurs the confidence to innovate.

And Luxembourg is by no means the only Bitcoin regulatory safe haven in Europe.

As early as 2013, Germany's financial regulator BaFin classified Bitcoin as a "financial instrument," allowing companies in the industry to better understand Bitcoin's position in the law.

Kaja Ribnikar, executive assistant at bitcoin exchange Bitstamp, said the company’s relationship with European regulators in the region is positive, adding:

“There is no doubt that their regulation is open, acceptable and more balanced for Bitcoin. Obviously, the environment in the United States is undoubtedly very difficult for Bitcoin businesses.”

In the United States, regulatory insecurity and high application fees are very common, which was the case before BitLicence, which has brought a lot of pressure to entrepreneurs.

Henrik Hjelte, co-founder of ChromaWay, an open-source colored coin wallet based in Stockholm, explained that the company almost moved to the United States about a year ago, but ultimately the expensive “compliance bills” scared the team away, and the company decided to move to Europe. “So far, we have not regretted it,” he said.

Eric Larchevêque, CEO of France-based bitcoin hardware wallet company LedgerWallet, believes that the company can enjoy “great benefits” in Europe, especially in France.

"We have both received a significant state-funded grant which has helped fund our research and development," he added.

Confusing elastic legislation

In early 2014, the IRS ruled that Bitcoin must be treated as property and taxed as such, but federal judge Frank Fletcher, in the Silk Road case, ruled that Bitcoin should be considered currency.

Impartial observers have pointed out that European governments see Bitcoin as more of an opportunity than a threat. In 2013, the UK issued a summary of Bitcoin income and customs duties, outlining the circumstances under which Bitcoin income is taxed.

Additionally, the Spanish tax authorities confirmed in April that Bitcoin will be exempt from value-added tax (VAT). Subsequently, the European Court of Justice’s general counsel stated that digital currencies such as Bitcoin are exempt from VAT.

Europe as Bitcoin Hub?

Despite the positive development of Bitcoin in Europe, there is still very little media coverage of it. The voices of European startups are often overshadowed by the presence of their American counterparts. In the Bitcoin network, only about 25% of the share is in Europe, so it is normal for you to put the United States first.

However, Europe has been developing and innovating around Bitcoin. For example, the first-generation Bitcoin exchange Bitstamp has fully implemented KYC processes and hot wallet multi-signature technology.

Other companies in Europe, including bitcoin wallet providers Trezor and LedgerWallet; Bitbond and colored coin creator ChromaWay, are also implementing open source protocols and creating their own applications.

choose

Bitcoin is a disruption, an innovation. Bitcoin is truly global. Its success will be based on its applications, and in order for innovation to be born better, advanced legislation will be necessary.

Bitcoin needs governments to see its potential and allow it to grow at its own pace.

As Bitstamp’s Kaja Ribnikar put it, European regulators have realized that outlawing Bitcoin would mean “killing a very strong and beneficial ecosystem.”

Many entrepreneurs say that the U.S. market offers the highest level of venture capital, which alleviates the troubles caused by unfriendly U.S. legislation. SatoshiPay CEO Meinhard Benn once said: "U.S. laws give advantages to companies with strong financial resources, but in turn, they inhibit innovation."

We should stay away from such an environment, and advanced legislation can open the door to innovation. Many European countries have provided a legal framework that gives Bitcoin entrepreneurs the confidence to create and find new Bitcoin applications.

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