When the concept of fiat currency was introduced, no one could have conceived the plethora of cryptocurrencies that we see today. Forget the number of cryptocurrencies, even the idea of a completely digital currency was alien.  

Fast forward 70 years later, governments, financial institutions, and international organizations struggle to cope with them. In 2008, when Satoshi Nakamoto invented bitcoin, no one could have anticipated the ripples that it is causing today. The identity of the man remains shrouded in mystery, and so did bitcoin for quite a long time. Today it is the buzz words on everyone’s lips. 

Cryptocurrency represents what could be the future of currency in economies around the world. Not backed by any physical instrument, it is an unregulated currency. Its price relative to a physical currency is driven largely by speculations, and most recently by tweets by a Billionaire. These speculative tendencies have prompted countries and experts alike to dismiss cryptocurrencies as unreliable and volatile. Even if that may be true, it is here to stay, and that means ways have to be found to regulate it.

This article would focus largely on the EU, and since countries in the EU have different individual stances on the topic, our focus would revolve around France, Germany, and the UK. The EU is quite accommodating towards cryptocurrency in general. Cryptocurrency exchanges are legal, although there is no consensus on the possibility of it being legal tender.  

The problem with classifying cryptocurrency as legal tender is that there are a large number of cryptocurrencies available in the market. Which amongst these are to be pronounced legal tender is a tedious task, and the volatility makes it even worse.  

In this background, let us examine the UK first. Even if the UK is not a part of the EU anymore, it still mirrors the rules and regulations of the latter. Cryptocurrencies are not legal tender, whereas cryptocurrency exchanges are legal. It is treated as a property, but cannot be used as a currency in the formal sense. The exchanges are subject to AML/CFT regulations which pertain to anti-money laundering and terrorist financing laws.  

The same is the case with France and Germany as well. France has enacted KYC (Know your customer) regulations to make transactions on the exchanges traceable. In a nutshell, the EU and the UK classify them as crypto-assets and not as cryptocurrencies. Since the exchanges are legal, the capital gains on these assets are taxed. The tax rates vary across countries. 

The future for these currencies to be accepted as legal tender seems far-fetched at least for now. Paradoxically, however, governments across the world have made known their intentions to create their cryptocurrencies. But since the essence of cryptocurrencies is decentralization, the efforts seem futile, as they would be controlled by the government to some degree. 

There are countries where bitcoin is a legal tender, or a country rather. El Salvador under its enthusiastic president Nayib Bukele declared bitcoin a legal tender. Following this Paraguay is also pushing to do the same. How it works in a real-life scenario remains to be seen, as the currency has been quite volatile the last couple of months.   

El Salvador's decision to accept Bitcoin as payment is the first in the world.

Even though the future for these currencies seems uncertain, they offer something different from the conventional monetary system. They give us something to ponder about, and in situations where the monetary system fails, it acts as a lucrative alternative. Take the example of Venezuela. Bitcoin was increasingly used as an alternative when the Venezuelan economy was going through a massive crisis. When the conventional currency has no value, cryptocurrency seems like a haven. On the other hand, in mature economies such as Europe, such a compulsion for declaring cryptocurrencies as legal tender finds no place.   

Will Cryptocurrency Become Legal Tender in Europe?

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