Bitcoin and Eu Vat a

Articles

European Union

Redmar Wolf*

Bitcoin and EU VAT

A relatively new phenomenon is the appearance

of cryptocurrencies with bitcoins as their most

prominent representative. In this article, the

author discusses the VAT aspects of the use,

exchange and mining of bitcoins under the EU

VAT system.

1. 

Introduction to Bitcoin

Legislation often fails to keep pace with technological

developments. A recent example of regulators lagging

behind is the appearance of cryptocurrencies with bitcoins

as their most prominent representative. Since the EU VAT

Directive1 does not contain any provisions on cryptocurrencies, there is no certainty about the VAT aspects of this

new means of payment. In view of the amount of bitcoins

already in “circulation”, this issue definitely requires immediate attention.

Bitcoin2 is an open-source, peer-to-peer digital currency.

It is based on the principles of cryptography (communications through secure channels) for validating transactions and controlling the production of the currency

itself.3 Bitcoin was developed by a programmer (or group

of programmers) who used the pseudonym Satoshi Nakamoto and whose identity remains unclear. The unit of the

Bitcoin network is bitcoin or BTC (or XBT), which many

consider to be a currency or Internet cash.4 This digital

currency has no physical form but only exists as a balance

in an electronic bitcoin account (or “wallet”).

Bitcoins are not issued by states, banks or other financial institutions; they are generated by the Bitcoin software itself and can only exist within the Bitcoin system.5

Bitcoins are not pegged to any real-world currency. The

exchange rate is determined by supply and demand in the

market. There are several real-time exchange platforms for

buying and selling bitcoins.6

*

Prof. dr Redmar Wolf is Senior Counsel with Baker & McKenzie

Amsterdam and Professor of indirect taxes at the Faculty of Law of

the VU University Amsterdam.

1.

Council...