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Denmark: Recent Bank and Tax Statements on Bitcoin

(July 16, 2014) On March 18, 2014, the Danish Central Bank issued a statement declaring that Bitcoin is not a currency. The Bank went on to explain, “Bitcoin does not have any real trading value compared to gold and silver, and thus is more similar to glass beads.” (Press Release, Bitcoin er ikke penge, Danish Central Bank [Nationalbanken] website (Mar. 18, 2104).) The Danish Central Bank went on to point out that Bitcoins are not protected by any national laws or guarantees, such as a deposit guarantee. (Id.)

The use of Bitcoins as a payment method is still very limited, according to Central Bank Director Hugo Frey Jensen. Nevertheless, the European agencies are currently investigating whether the use of Bitcoins should be regulated in the future. (Id.)

The Bank’s declaration came months before a Bitcoin trading platform was scheduled to open in Denmark. (Ray Weaver, Bitcoin Exchange Set to Open, COPENHAGEN POST (May 26, 2014).) The platform founder is using Denmark as a selling point in trying to attract customers, declaring that “clients will know where we are, that the jurisdiction is Danish and that there is complete transparency” and that he will operate the business as if he were regulated by a “financial watchdog.” (Id.)

The Danish Tax Authority (SKAT) has also had to deal with Bitcoin issues recently. On April 1 2014, the Tax Authority published a binding reply in which it declared that an invoice cannot be issued in Bitcoins, but must instead be issued in Danish Kroner or another recognized currency. (Bitcoins, ikke erhvervsmæssig begrundet, anset for særkilt virksomhed, SKAT (Apr. 1, 2014).) The Authority went on to state that any losses in Bitcoins cannot be deducted as a cost of doing business. (Id.)

Prepared by Elin Hofverberg, Foreign Law Research Consultant, under the supervision of Peter Roudik, Director of Legal Research.