Bitcoin might soon come across a hard time in the coming days, especially in Europe. There have been reports that bitcoin was used as a mode of financing in the recent terrorist attacks at Paris, France. These reports have triggered a debate in the European Parliament on the threat posed by bitcoin.
There have always been rumors and speculation that bitcoin will soon turn out to be the most favored currency among terrorist groups. The pseudonymous nature of bitcoin makes it hard to trace the individuals and entities behind bitcoin transactions. This cloak of secrecy is seen as an advantage for money laundering, illicit transactions, purchase of drugs and contraband among others.
The Interior and Justice ministers from the European Union nations met last week to reevaluate the status of bitcoin, digital currencies, payment cards and other unconventional modes of payments. The ministers have agreed to introduce stringent checks on anonymous payment methods, which includes non-banking payment methods like remittances, virtual currencies, precious metals, prepaid cards, gift cards and other electronic payment options.
The European Union nations believe that by keeping tab on these payment options, the governments can prevent terrorist organizations from having access to funds. These limitations come at a bad time, especially when bitcoin was gaining widespread acceptance among the countries in Europe.
The European Court of Justice had recently ruled that VAT is not applicable for bitcoin exchanges. That, along with few other rulings in the past had imparted bitcoin with certain privileges that are generally applicable for currencies. The restrictions imposed by European Union may hinder the progress of bitcoin industry in the region, especially at the time when bitcoin was steps away from attaining the mainstream status in Europe.
Further Reading: European Court of Justice Rules in Favour of Bitcoin – No VAT
However, many people believe that the governments are wrong in clamping down bitcoin as the real threat here is underground fiat currency which can’t be accounted for. The market cap of the current bitcoin network less than one percent of the total global economy and the total value of unaccounted US dollars itself is over 10 times the total market cap of bitcoin