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Israeli court refused to recognize cryptocurrency as money

05/23/2019
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  • Israel
  • cryptocurrency
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A court in the Central District of Israel ruled on the essence of Bitcoin. It denied the entrepreneur Noam Copel his request. He demanded to recognize the cryptocurrency as money, which could radically change the attitude of the tax authorities to the rules of market regulation.

The essence of the court case of Noam Copel

In 2013, a businessman-owned cryptocurrency startup DAV recorded a profit on the sale of bitcoins. In total, he earned about $ 2.29 million. As a result, the company must pay capital gains tax. However, the founder of DAV did not want to do this, and he has his own arguments for this.

Profit from investing in the purchase of foreign currency can be viewed as the difference in rates. According to Israeli law, such operations are not taxed.

To prove his point of view, the businessman went to court. His opponent was the Tax Service. It was on its side that the Israeli court stood. It argued its decision by the fact that, according to the formulation of the Central Bank, Bitcoin is not a foreign currency. From the point of view of accounting and economic use of a bitcoin financial asset. That is, the same rules should apply to it as when working with securities.

Bitcoin is a financial asset and money

In the end, an Israeli businessman will have to pay about 30% of the amount received to pay taxes. However, it is too early to put an end to this discussion. The court decision states that Noam Copel could not prove the main thing, that in any country of the world it would be able to use cryptocurrency for payments and for assessing the value of goods and services. But how long will this situation last?

A number of American and European stores are ready to accept payments from customers in Bitcoins. While these projects are underway, however, the largest retail chains are already working on them.

It is likely that in the near future the situation will change radically. If retail buyers can pay with cryptocurrencies, their function as money will increase significantly. And do not forget about stablecoins. These coins based on the blockchain were originally created as a means of payment, in principle, they are not intended for speculative operations.

American judicial experience

Some countries refer to American experience in regulatory matters. Here, in 2015, the Commodity Futures Commission (CTFC) decided to consider cryptocurrency as a commodity. However, it is constantly challenged by businessmen who are unhappy with the rules of regulation.

When Bitcoin is recognized as a commodity, its owners will have to pay not only income tax, but also property tax. In some countries, these deductions can make an asset purchase unprofitable.

In 2018, the CTFC decision was again confirmed by the Brooklyn District Court. Judge Jack Weinstein noted that in its essence Bitcoin fits perfectly with the definition of “exchange commodity”. However, the point set early. In April 2019, Chase Bank filed a lawsuit in the Federal Court of Manhattan, in which it demands to recognize Bitcoin as money, along with ordinary cash. While the judicial authority has not yet made a decision. But if it takes the side of the plaintiff, it will radically change the rules for regulating the cryptocurrency market.

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