How is Bitcoin regulated in Ireland?

This is a question that usually gets a simple answer. That answer being that Bitcoin is not regulated in Ireland.

However whilst that may be the formal position of the government and regulatory authorities, that is not always the case in reality.

The Official Position

The Central Bank of Ireland regulates the Irish financial services sector. It is the most natural place for any regulation around Bitcoin, Crypto or any other financial applications of Blockchain based systems to be developed.

At present the Central Bank of Ireland imposes no regulations on the ownership or trading of Bitcoin or any Altcoins. Its position remains that:

‘Virtual currencies such as Bitcoin are not regulated therefore no regulatory requirements apply to these currencies’

The Reality

It would seem on the face of it then that Ireland is one of the more liberal jurisdictions when it comes to its handling of this new technology.

Whilst that may be the official line things can operate differently on the ground.

Many Irish banks can be reluctant to deal with businesses for which Bitcoin is a driver of their model. In a recent interview on this blog we have seen that this can even result in the closure of the business as over the counter cash services can in some cases not be accessed.

Thus the absence of regulation is not a benefit or a positive, but a drawback with banks unsure of what the rules are, taking a very cautious approach to dealing with startups in this field.

That does not mean that there is no activity in this area though. The lack of regulation has meant that new entrants to the market have tried to self regulate.

They have essentially tried to assume what regulations could be brought in, adapted some of those already in place that do not yet specifically reference Bitcoin and implemented them.

Thus many new businesses in the field have AML checks and client identification procedures which they developed internally themselves.

What would help ?

In essence some broad guidelines for the Irish banking sector would be useful. It would allow them better understand the risks they are facing when they take on such business and the regulators expectations if they do.

At present, they have nothing, which means self regulation and a very cautions approach. An effort to discredited it by not giving it formal status creates a very confusing picture for everyone.

Specific regulatory guidance for those thinking about an exchange based startup would also be helpful. Its hard to believe that a large Irish based Crypto exchange would not attract any regulatory attention.

If anything regulation is likely to be forced on Ireland anyway in the future either from the IMF or even the European Banking Authority. This will most likely be led by the regulatory landscape in Germany. Keeping an eye on that could be really useful to all those concerned.

Dont forget about tax !

Whilst Bitcoin is not regulated in Ireland that does not mean that you do not have a tax liability if you trade in Bitcoin or any Altcoin for that matter.

In Ireland you have to pay tax on any Crypto asset sales just like the sale of any other asset. That means that you are liable for Capital Gains Tax.

33% of your profit belongs to the government and you need to make sure you have kept proper records of your trading activity and can evidence where the money has come from and gone too.

It also means that you have to treat this as a regulated asset, even if it is not and get professional advice when it comes to your financial dealings in it.