The debate over whether Bitcoin is a currency or an asset has reignited following reports that a U.S. federal court recently recognized Bitcoin as “money.” While headlines vary in interpretation, the underlying legal and regulatory distinctions across countries reveal a complex global landscape. From the United States to China, Japan to the European Union, governments are taking divergent approaches to classifying and regulating Bitcoin—shaping how it can be used, taxed, and protected under law.
This comprehensive analysis explores how major economies define Bitcoin, the implications of these classifications, and what they mean for investors, users, and the future of digital finance.
United States: Mixed Signals Across Agencies
In July, the U.S. District Court for the District of Columbia ruled that Bitcoin qualifies as "money" under the district’s Money Transmitters Act. The decision came during the prosecution of Larry Dean Harmon, operator of a Bitcoin-based underground exchange, who faced charges for operating an unlicensed money transmission business and money laundering.
While the law doesn’t explicitly define Bitcoin as currency, Chief Judge Beryl A. Howell stated that Bitcoin functions as a medium of exchange, payment method, and store of value—core characteristics of money. This judicial interpretation marks a significant precedent, even if limited to one jurisdiction.
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However, the U.S. regulatory framework remains fragmented. Different federal agencies classify Bitcoin differently:
- IRS (Internal Revenue Service): Treats Bitcoin as property for tax purposes, meaning capital gains apply.
- CFTC (Commodity Futures Trading Commission): Classifies Bitcoin as a commodity, similar to gold or oil.
- SEC (Securities and Exchange Commission): Focuses on whether specific cryptocurrencies qualify as securities under federal law.
This multi-agency approach creates a patchwork of rules, where Bitcoin can be simultaneously seen as property, commodity, and potentially money—depending on context. State-level regulations add further complexity.
China: Virtual Property with Legal Protection
China maintains a strict ban on cryptocurrency trading and initial coin offerings (ICOs), but its legal system increasingly recognizes Bitcoin as a protected form of virtual property.
In May, the Shanghai First Intermediate People’s Court ruled in a long-standing case that Bitcoin qualifies as a network virtual asset deserving legal protection. The court emphasized that while Bitcoin cannot be used as legal tender, ownership rights are enforceable—especially in cases involving theft, fraud, or contract disputes.
This aligns with Article 127 of China’s Civil Code, which came into effect in 2021 and explicitly includes data and virtual property within the scope of legal protection. Legal experts like Xiao Sa, a council member of the China Bank Law Society, note that while only Bitcoin has received clear judicial recognition so far, other digital tokens may gain similar status if they meet property criteria and comply with existing laws.
Despite the trading ban, Chinese courts have consistently upheld ownership rights in over 600 recorded cases involving Bitcoin disputes—up from just 12 in 2014. This trend suggests a growing judicial consensus: you can’t spend it, but you can own it.
Russia: Digital Financial Assets Without Payment Status
Russia has long been cautious about cryptocurrencies, but recent legislative changes signal cautious progress. In July 2020, President Vladimir Putin signed the Digital Financial Assets Law, granting legal status to digital assets starting in 2021.
Under this law:
- Digital financial assets (DFAs) can be bought, sold, exchanged, and used as collateral.
- They include rights such as claims on money, securities, or equity in private companies.
- However, cryptocurrencies cannot be used as payment within Russia.
Russian banks and exchanges may now operate as DFA exchange platforms—but only after registering with the Central Bank of Russia. The law stops short of legitimizing Bitcoin as currency but opens regulated pathways for investment and trading.
With over 90% of surveyed Russians expressing interest in crypto and 40% viewing Bitcoin as a strong long-term investment, demand is clearly outpacing policy. Full monetary recognition remains distant, but the door to regulated digital finance is now open.
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Japan: Crypto-Friendly Nation with Strict Oversight
Japan stands out as one of the most crypto-accepting countries globally. Home to over 6 million digital asset investors, it ranks as the world’s second-largest crypto market.
Since 2016, Japan’s Payment Services Act has recognized cryptocurrencies like Bitcoin as legal payment methods. In 2017:
- Bitcoin was formally recognized as a legitimate means of payment.
- Exchanges were required to register with the Financial Services Agency (FSA).
- The 8% consumption tax on crypto purchases was removed.
Today, Bitcoin is classified as an "encrypted asset" rather than legal tender. While widely accepted by retailers and service providers—from hotels to vending machines—Japan enforces rigorous compliance standards on exchanges. The Self-Regulatory Organization (SRO) for crypto exchanges introduced strict guidelines in 2019 for token sales and investor protection.
This balanced approach—embracing innovation while prioritizing security—has made Japan a model for responsible crypto adoption.
European Union: No Unified Stance Yet
The EU has not issued a centralized regulation classifying Bitcoin. According to Pēteris Zilgalvis, head of digital innovation at the European Commission, there’s currently no plan to regulate Bitcoin unless clear risks emerge.
However, individual EU nations have taken varied positions:
- Germany: Recognized Bitcoin as a “unit of account” and private asset in 2013; exempt from capital gains tax if held over one year.
- Finland: Treats Bitcoin as a financial service and commodity, exempt from VAT.
- France: A 2020 court ruling declared Bitcoin a “fungible intangible asset,” reinforcing its status as a tradable financial instrument.
These national-level decisions suggest gradual acceptance across Europe—even without EU-wide legislation.
Frequently Asked Questions (FAQ)
Q: Is Bitcoin legal tender anywhere in the world?
A: As of now, only El Salvador and the Central African Republic have adopted Bitcoin as official legal tender. Most countries treat it as an asset or payment method—not sovereign currency.
Q: Does classifying Bitcoin as an asset vs. currency affect taxation?
A: Yes. Asset classification typically triggers capital gains taxes upon sale or exchange. Currency treatment may involve income or transaction taxes depending on use.
Q: Can I inherit Bitcoin under current laws?
A: In jurisdictions like China and parts of Europe and the U.S., courts recognize Bitcoin as property that can be included in estate planning and inheritance.
Q: Why do regulators struggle to classify Bitcoin?
A: Because it functions simultaneously as a payment system, investment vehicle, and technological platform—challenging traditional financial categories.
Q: How might future regulations impact crypto adoption?
A: Clearer rules could boost institutional investment and consumer confidence—but overly restrictive policies may drive activity underground or offshore.
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The classification of Bitcoin—as currency, asset, or something entirely new—remains unsettled globally. Yet one trend is clear: governments are moving from outright bans toward structured recognition. Whether through property rights in China, judicial precedents in the U.S., or regulated trading frameworks in Japan and Russia, the world is slowly building a legal foundation for digital finance.
As regulatory clarity improves, so too will mainstream adoption, investor protection, and cross-border interoperability. For users and institutions alike, understanding these evolving frameworks isn’t just smart—it’s essential.