Bitcoin in Taiwan from a legal perspective
Bitcoin has been the subject of controversy but is also growing in popularity as a digital alternative to national currencies. While critics highlight the deficiencies in the system that creates and distributes bitcoins as well as some high-profile cases of bitcoins being stolen or used by criminal organisations, thousands of companies and non-profit organisations have begun to accept bitcoins as payment for goods and services.
Kaiser believes that Bitcoin or a similar crypto-currency will have a disruptive impact on traditional currency systems and financial services industry. He noted that before the internet, postal and telecommunications services were well-regulated and profitable businesses. However, the arrival of new technologies, namely email and voice-over-internet-protocol (VoIP) completely disrupted these traditional business models. In the same way, the music and travel industries have been disrupted by online music and travel services. The practice of law is still heavily regulated everywhere in the world but a lot of information that previously required the skills of a lawyer to access is now available through online searches, thereby challenging the legal services industry.
Bitcoin is only illegal in two countries at the moment: Russia and Thailand. Elsewhere its status is either fully or partially legal or not yet clearly defined. Taiwan's Central Bank, for example has issued a statement saying only that Bitcoin is highly volatile, may be stolen or lost and is not covered by insurance protection as ordinary bank deposits are. Taiwan's authorities do not currently regard Bitcoin as a currency or a service but rather as an intangible good. It is not legal tender in Taiwan but then neither are other foreign currencies. Kaiser noted that it common for merchants and hotels to accept foreign currency and the same is now happening with Bitcoin as a growing number of merchants and services firms are accepting them.
Currently Bitcoin is not subject to tax (VAT or income tax) but it may well be in the future. The ECCT has consistently called on the Taiwan authorities adopt the best international practices but in the case of Bitcoin, there is as yet no common international standard. Currently, neither the United Kingdom nor the United States impose taxes on Bitcoin. As for regulation in general, Kaiser's opinion is that some form of regulation is needed but, as with other financial services, too much regulation would stifle innovation and the competitiveness of service providers in heavily-regulated jurisdictions.
Kaiser went on to answer some of the main criticisms that have been levelled at Bitcoin. On the issue of much-publicized recent collapse of Bitcoin exchange Mt. Gox, Kaiser said that there were plenty of prior warning signals that the exchange was badly managed and smart investors had switched to more reputable exchanges well ahead of its collapse. On the issue that Bitcoin is used by criminals, while true, is not in itself a fair criticism since the majority of criminals still prefer cold hard cash, usually US dollar bills. Moreover, the still limited size the Bitcoin market means that it is difficult to launder large sums of money without attracting attention and moving the market. This means it is not be a very attractive avenue for large criminal organisations. On the issue of safety, Bitcoins may be stolen but the same is true of cash. No type of currency is totally safe but given the rapid development of cyber-security systems, the safety of deposits is likely to improve in future. However, two criticisms that have not yet been satisfactorily answered are that Bitcoin suffers from the same deficiency as other fiat currencies in that there is nothing backing the currency while the commercial use of Bitcoin, illicit or otherwise, is currently very small compared to its use by speculators, which has fuelled enormous price volatility in recent months.