The dictionary defines money as something that's generally accepted as a medium of exchange, a measure of value, or a method of payment.
For those who support the use of bitcoins as a legitimate form of money or currency, you may find you have new opponents: Thailand, China, and Norway. With various governments taking a firm stand on the bitcoin debate, is the crypto-currency on the chopping block?
Though bitcoins have been circulating since early 2009, the anonymous virtual currency has only recently gained huge support, with trading propelling it higher than the price of gold in late November. The true debate stems from the fact that the currency's value is based solely on what traders are willing to pay for it. Without a tangible asset linked to the value of the currency, there are plenty of concerns that the value could collapse at the slightest hiccup.
And that's exactly what happened this morning, after it was announced that China's largest exchange, BTC China, will no longer take orders in Chinese currency after the government demanded that businesses stop accepting bitcoins as a form of payment. The virtual currency's value dropped by nearly half on the news.
More where that came from
China isn't the only foreign government taking a firm stance on its opinion of the virtual currency. Thailand's government deemed the use of bitcoins illegal because of a lack of applicable laws in force. And now Norway, the richest of the Scandinavian countries, has come out stating that it does not recognize bitcoins as legitimate currency.
Norway's director general of taxation, Hans Christian Holte, stated that bitcoins are not actually a currency but an asset. So the rise and fall of value would be treated as such, with gains being taxed like any normal capital gain. Businesses would also be taxed at a 25% sales tax. The statement follows closely after one released by the German government. The decision may not be final, as Holte works with other international regulators to further develop laws for the currency, but for now the tally for governments against bitcoins as a currency is growing.
In the U.S., the debate is widely spread, with plenty of support for the use of bitcoins. Bank of America has released some research stating that the virtual currency has the potential to be a "major means of payment for e-commerce" in the future, with an estimated value of $1,300 per bitcoin.
But the bank is also aware of some of the biggest detractors from bitcoins: price volatility, security issues, legality, and transaction time. Though the technology was initially introduced as a way to empower the ordinary man against banks, the review from Bank of America is a promising one for those hoping the currency becomes widespread.
Richard Branson has also announced that his Virgin Galactic division would accept payment for space travel in bitcoins. A Tesla Model S was recently purchased from a Lamborghini dealership in bitcoins. The University of Nicosia in Cyprus has announced that the virtual currency will be accepted as a form of payment for tuition.
If you follow true to the definition of money, what Bitcoin needs is a bigger swath of companies and organizations that accept its currency as a form of payment. The "generally accepted" part of the definition would help legitimize the currency -- though it wouldn't quell any concerns about the price volatility risk. If you're interested in bitcoins, just remember the virtual currency will act like a traditional stock, though there is little that you can research into determine whether the investment is a good one or not.
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