Germany Legalizes Bitcoin: Competing Currencies Are Here!

While Thailand may have banned Bitcoin, the electronic currency — although some are not so sure — the economic powerhouse of Germany has just made it legal tender:

Virtual currency bitcoin has been recognized by the German Finance Ministry as a “unit of account”, meaning it is can be used for tax and trading purposes in the country.

Bitcoin is not classified as e-money or a foreign currency, the Finance Ministry said in a statement, but is rather a financial instrument under German banking rules. It is more akin to “private money” that can be used in “multilateral clearing circles”, the Ministry said.

Moreover, one Parliamentary official, a member of the classical liberal Free Democrat party that is currently part of the coalition government, gave a truly liberal backing for the decision:

“We should have competition in the production of money. I have long been a proponent of Friedrich August von Hayek scheme to denationalize money. Bitcoins are a first step in this direction,” said Frank Schaeffler, a member of the German parliament’s Finance Committee, who has pushed for legal classification of bitcoins.

CEI contributor Sascha Tamm advocated competing currencies as the solution to the problems facing the Euro currency in a CEI Web Memo last year:

Chancellor Merkel and many other European leaders want to defend the euro at any price, calling the single currency the foundation for the rise of a “United Europe.” The opposite is true. The euro is, in fact, one of the major causes of the problems besetting Europe today. And things could still get worse. Maintaining the currency union in its present form may cause the breakdown of Europe’s single market over the long run.

Is there a solution? Yes. The basic principles of the common market could save the European Union, if they were applied to monetary policy. Europe’s currency future lies in competition.

We are glad that Germany has decided to follow the advice of Hayek and Tamm. Given that so many Germans were reluctant to give up the Deutschmark in favor of the Euro, it will be interesting to see how many individuals and businesses start using it as their “unit of account.”