In an important ruling for digital currency service providers, EU’s top court, the Court of Justice of the European Union (CJEU), ruled that transactions to exchange a traditional currency for bitcoin virtual currency, or vice versa, were not subject to value added tax (VAT), effectively treating such transactions like an exchange of cash. (Skatteverket v David Hedqvist (C-264/14) (22 October 2015)). The CJEU declined to construe the exemption in question to apply only to transactions involving traditional currency under the facts presented.

Digital currency advocates hailed the decision, as it removed some regulatory uncertainty surrounding bitcoin exchanges, perhaps spurring further development in this nascent industry.  We will see how this ruling impacts bitcoin service providers in the EU.