European Central Bank Governor about Tax and Regulation on Bitcoin

On Wednesday a top European Central Bank official suggested governments to regulate and tax bitcoin, marking the digital currency an object of speculation and a tool for money laundering.

“One ought to apply what the basic rule is in any other financial transaction: everyone involved should reveal their identity,” ECB governing council member Ewald Nowotny told the German daily Sueddeutsche Zeitung.

“We need a value-added tax on bitcoin, since it’s not a currency,” said Nowotny, who is head of Austria’s central bank.

Central bankers have a concern about “digital gold”, because money launderers find a way to escape from strict rules of traditional banking system.

“It can’t be allowed that we’ve just decided to stop printing 500-euro notes to fight money laundering, that we’ve slapped strict rules on every tiny savings club, and then have to watch people blithely laundering money around the globe with bitcoin,” Nowotny said.

Bitcoin is a digital currency created in 2009 from computer code. It uses blockchain to record transactions that are updated in real time on an online ledger.

Bitcoin is perhaps the best known and most popular virtual currency and its value surged as high as $19,500 in December from around $1,000 in January, but has slipped back after a series of warnings from governments and analysts about the risk and volatility associated with cryptocurrencies.

Nowotny acknowledged the topic had “reached the heart of society,” while blasting the cryptocurrency’s bubble-like characteristics. Currently, people ask him on the Vienna metro whether they should buy bitcoin, rather than gold as in the past.

He said, that the central bank would only have to intervene if bitcoin were to change people’s behavior.