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Bitcoins: Currency for Criminals?

Israeli authorities are examining the possibility of taxing commerce conducted with bitcoins, which secures the identity of its users but is also a tool for drug and arms dealers.
Some of Bitcoin enthusiast Mike Caldwell's coins are pictured at his office in Sandy, Utah, September 17, 2013.Caldwell produces physical coins Bitcoins, which have been around since 2008, and have become a form of electronic money that can be exchanged without using traditional banking or money transfer systems. Bitcoins, touted by some experts as the future of money, gained in prominence during Europe's financial crisis as more people questioned the safety of holding their cash in the bank. REUTERS/Jim Ur
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There have been reports in the Israeli media over the past few days that Israel’s tax authorities are examining the possibility of imposing taxes on profits earned from transactions conducted with bitcoins. At the same time, it has also been reported that banks are limiting the use of this currency. Since bitcoins are not currently recognized by Israel as legal tender, issues pertaining to this currency are especially complicated. With no supervision over bitcoin transactions and no requirement to report trade in the currency, questions relating to their taxation are in a state of limbo.

Following a decision by a federal court in Texas, the United States recognized the virtual currency including in all matters pertaining to taxation in August 2013. So did Germany, which established the first bitcoin trade platform in Europe, in an act of collaboration between the country’s Finance Ministry and a local bank.

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