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Bitcoin is a new
entry this year
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Bitcoin is the world's least underground underground currency,
with more and more people and organisations becoming aware of
it. This time last year its price was volatile, fluctuating
between $600 and $800 after breaking the $1,000 barrier for the
first time in November 2013. The price at the time of writing
stands at around $375 per bitcoin.
Created in 2009 by Satoshi Nakamoto – a pseudonym
for a person, or possibly a group of people – bitcoins
are released by "mining". The process involves using computers
to complete complex mathematical equations, with 25 new
bitcoins being released roughly every 10 minutes.
The fact that the currency can be 'won' by anyone –
either individuals, companies or syndicates – is
central to its anonymous nature. It is a purely online currency
meaning that once an individual has secured their bitcoins
– either through mining or, more commonly, through
buying them – there are no transaction fees, no need
for banks to be involved and they are not traceable.
While this gives them a perhaps deservedly shady reputation
as an ideal currency for purchasing drugs or money laundering,
it also makes them useful for small businesses to avoid credit
card fees. Bitcoins can be used to buy an increasing amount of
goods and services, from a range of online services to
home-delivered pizza.
Bitcoin is no longer something nobody has heard of: it
generates serious financial interest. Michel Barnier, then the
EU commissioner for financial services, spoke out against the
currency in July, and some countries, including Russia, China
and Denmark, have banned trading in it altogether.
Moving in the other direction is Finland, which in November
made a ruling which moved Europe closer to legitimising bitcoin
as a currency by stating that commission fees charged on
bitcoin purchases by exchange market were banking services
under the EU VAT Directive – and thus VAT exempt.
The EU is considering its classification and treatment of
digital currencies after Sweden referred a question to it in
June regarding their classification.