Earlier this week, the European Court of Justice decided to exempt bitcoin transactions from Value Added Tax (VAT).

In so doing, the court effectively recognized bitcoin as a legitimate means of payment in Europe, putting it in the same realm as other currencies for tax purposes.

The ruling comes months after court advocate general Juliane Kokott said the court should refrain from applying tax to bitcoin sales and purchases in an opinion published in July.

Europe’s highest law court first began looking into bitcoin taxation in June last year after the Swedish tax office challenged a court decision which ruled that transactions in the digital currency should be exempt from VAT, following a dispute with Daniel Hedqvist, a forum operator who at the time wanted to establish a bitcoin brokerage.

Unsurprisingly, the court’s ruling was well-received by exchange operators in Europe, some of whom told CoinDesk that the decision is a positive step for both the business of buying and selling digital currencies and the technology as a whole.

‘A big milestone’

Some operators saw the event as a watershed moment for bitcoin in Europe. Filip Godecki, COO at Poland-based Bitcurex, predicted that the decision will help reduce barriers to greater adoption of the digital currency.

“This Court decision is a nod in the direction of the primary functions of the virtual currency: payments,” he said. “The decision may become an impetus for the development of crypto payments in the EU, and thus the Bitcoin ecosystem as such.”

Nejc Kodric, CEO of Bitstamp, said that the ruling “brings additional clarity and legal certainty to an economy which is still a work in progress”.

“Thanks to Mr. Hedqvist, all bitcoin businesses serving EU customers can now breathe a sigh of relief knowing that they are safe from surprises arising from their national or EU VAT regulations,” he said.

According to LocalBitcoins founder Nikolaus Kangas, the decision is “a big milestone for bitcoin in general”.

“This kind of ruling is clearly another step to legitimize bitcoin as a real currency,” he said in an email.

Paymium co-founder Pierre Noizat told CoinDesk that while his firm is still looking at the implications of the ruling, the decision is being interpreted as a positive one for the exchange.

“At first, I would say that it is one more step towards clarifying the context of our operations as a Bitcoin exchange and payment solutions provider,” he said. “Such clarifications are perceived by businesses and individual citizen as reduction of risks and uncertainties surrounding the adoption of an innovation.”

Boon for European startups

Alberto Gomez Toribio, CEO of Coinffeine, was among several exchange operators who said they believe the decision will help make Europe a more business-friendly environment for companies looking to build products and services around bitcoin.

“Regulation is proving to be more efficient than the technology to organise the rights and the correct functioning of the market, and I am glad,” he said in an email.

CEX.io‘s chief legal officer Victoria Polyakova called the ruling “absolutely reasonable and quite expected”.

“The official position of the Court makes the EU zone even more bitcoin-friendly than it was before, unlike, for instance, some Eastern European and Central Asian countries,” she said.

ShapeShift CEO Erik Voorhees shared the view that the ruling puts Europe in a position to fully capitalize on the nascent technology and the businesses that want to work with it.

He told CoinDesk:

“It’s refreshing to see politicians who aren’t taxing and regulating everything in sight. And [the ruling] is going to tip the scales further away from the US and toward Europe as the center of digital currency innovation.

This report was co-authored by Stan Higgins

Correction: A previous version of this article wrongly attributed CEX.io chief legal officer Victoria Polyakova’s comments to another CEX.io employee. This has now been corrected.

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