eCash Regulations

In 1996, Patrick G. Goshtigian discussed the regulations of eCash in a paper published at the Anderson Graduate School of Management at UCLA. In regards to security, Goshtigian stated;

“The legal challenges of E-cash entail concerns over taxes and currency issuers. In addition, consumer liability from bank cards will also have to be addressed (currently $50 for credit cards). E-cash removes the intermediary from currency transactions, but this also removes much of the regulation of the currency in the current system.

Tax questions immediately arise as to how to prevent tax evasion at the income or consumption level. If cash-like transactions become easier and less costly, monitoring this potential underground economy may be extremely difficult, if not impossible, for the IRS.

The more daunting legal problem is controlling a potential explosion of private currencies. Large institutions that are handling many transactions may issue electronic money in their own currency. The currency would not be backed by the full faith of the United States, but by the full faith of the institution. This is not a problem with paper currency, but until the legal system catches up with the digital world, it may present a problem with cybercash.”

For over twenty years we are still facing numerous legal questions surrounding eCash since it not only can cross borders but also because it’s difficult to track. These issues, especially the governmental oversight of currencies, will continue to be an issue with eCash use.

To have a better understanding of the laws and regulations regarding eCash, here are how several different countries are handling cryptocurrencies like Bitcoin:

The United States

Bitcoin is legal in the United States and was classified as a convertible decentralized virtual currency by the U.S. Treasury in 2013. In 2015, the Commodity Futures Trading Commission, CFTC, started to classify Bitcoins as a commodity. Currently, New York state is the only state to have granted a license to a Bitcoin exchange in 2015. The company, itBit, now has a bank-like status in the U.S.


According to the Library of Congress, “Canada does not have a specific law or regulation that regulates bitcoins.” However, Bitcoin is not considered legal tender in Canada and has been briefly mentioned during anti-money laundering and anti-terrorist financing regulations for virtual currencies.


Germany considers Bitcoins like foreign currency. While not recognized as legal tender, Bitcoins “are units of value that have the function of private means of payment within private trading exchanges, or they are substitute currencies that are used as a means of payment in multilateral trading transactions on the basis of legal agreements of private law. ”

The United Kingdom

While Bitcoins are not regulated in the UK, it’s been reported that “Her Majesty’s Revenue and Customs has classed bitcoins as “single purpose vouchers,” rendering any sales of them liable to a value-added tax of 10–20%.”


As of this writing, Japan has no laws regarding the use of Bitcoins. Haruhiko Kuroda, the governor of the Bank of Japan (BOJ), has said that the BOJ was “researching issues of bitcoins, but I have nothing to say regarding bitcoins at the moment.”


China is one of the few countries in the world where Bitcoins are essentially illegal. In fact, the country announced the “Notice on Precautions Against the Risks of Bitcoins,” in 2013 stating that it prohibits banking and payment institutions from dealing in Bitcoins.


While there doesn’t appear to be any legal framework that regulates, restricts, or bans the use of Bitcoins in India, the country’s banking institutions have warned customers about the potential hazards that Bitcoin can present. This was most evident with the 2013 release of the Reserve Bank of India’s public notice.


Bitcoin is currently in dispute in Russia. In 2014, Legislation was introduced by the Ministry of Finance that would view Bitcoin transactions as a misdemeanor and would impose fines for dealing with cyber currencies and monetary surrogates.


As noted by the Library of Congress, “On October 9, 2013, Brazil enacted Law No. 12,865, which created the possibility for the normalization of mobile payment systems and the creation of electronic currencies, including the Bitcoin. The Law provides, among other things, for the payment arrangements and payment institutions that comprise the Brazilian Payment System.”

Overall, most central banks across the world are cautioning individuals from using virtual currencies like Bitcoin. In most cases though, most authorities are allowing citizens to use virtual currencies, even though they’re not accepted as legal tender.