Bitcoin has been a global phenomenon for over a decade, capturing headlines with its volatile price swings and passionate community of supporters. Yet, despite its popularity, a critical question remains: What is Bitcoin actually used for in the real world? According to central bank data and financial regulators, the answer may surprise many.
👉 Discover how Bitcoin’s real-world use compares to the hype.
Bitcoin Is Not Legal Tender – It’s a Risky Digital Asset
The central bank has reaffirmed its stance: Bitcoin and other cryptocurrencies should be classified as virtual assets or digital commodities—not currency. While early visions of Bitcoin aimed to disrupt traditional money systems and enable decentralized payments, its development has fallen short of that goal.
The primary reasons? Extreme price volatility, rampant speculation, and widespread market manipulation. These factors have pushed Bitcoin away from its original purpose as a peer-to-peer electronic cash system and into the realm of high-risk investment vehicles.
Regulators globally, including Taiwan’s central bank, emphasize that due to these risks, Bitcoin does not meet the core functions of money—particularly as a stable store of value or reliable medium of exchange.
Over 90% of Bitcoin Transactions Are for Investment and Speculation
One of the most telling statistics comes from transaction analysis: nearly 90% of Bitcoin activity is tied to speculative trading or investment, primarily on cryptocurrency exchanges. Only about 1% of Bitcoin transactions are used for actual payments to merchants.
This imbalance highlights a crucial reality—Bitcoin is far more popular as a financial asset than as a payment method.
Even the UK’s Financial Conduct Authority (FCA) conducted a survey this year on why people buy cryptocurrency. The results were clear: the vast majority invest for speculative gains. Notably, zero respondents cited everyday payments as their primary reason for owning crypto.
This trend is consistent across markets. While some high-profile companies have experimented with accepting Bitcoin—such as Tesla briefly allowing it in 2021 or Microsoft supporting it for digital purchases—the adoption remains minimal and often short-lived due to volatility and technical challenges.
Why Isn’t Bitcoin Widely Used for Payments?
Several key factors limit Bitcoin’s use in daily transactions:
- Volatility: A merchant accepting Bitcoin could see the value drop significantly within hours.
- Transaction speed and cost: During peak times, Bitcoin fees can spike, and confirmation times lag behind traditional payment systems like credit cards or instant bank transfers.
- Lack of reversibility: Unlike credit card chargebacks, Bitcoin transactions are irreversible, increasing risk for both consumers and merchants.
- Limited merchant infrastructure: Few point-of-sale systems support crypto payments natively.
These barriers make Bitcoin impractical for routine purchases, such as buying groceries or paying utility bills. Instead, it functions more like digital gold—a scarce asset held for long-term value preservation rather than daily spending.
Regulatory Stance: Guarding Against Risk
In Taiwan, regulators have taken a cautious but structured approach. The Financial Supervisory Commission (FSC) and central bank jointly declared in 2013 that Bitcoin is a highly speculative digital commodity, aligning with international consensus.
The FSC oversees anti-money laundering (AML) compliance for cryptocurrency exchanges and mandates:
- Real-name registration
- KYC (Know Your Customer) procedures
- Adherence to global AML standards
These measures aim to prevent crypto platforms from becoming loopholes in the traditional financial regulatory framework.
While countries like the U.S. and Canada have approved cryptocurrency ETFs—including Bitcoin futures ETFs—Taiwan remains conservative. FSC Chairperson Huang Tien-mu stated in a legislative session that Taiwan will not rush to approve such products. With over 50% of local crypto investors being retail traders, the regulator is prioritizing investor protection over market expansion.
👉 See how global markets are navigating crypto investment trends.
Central Bank Digital Currency (CBDC): A Real Alternative?
As private cryptocurrencies struggle with practicality and regulation, central banks are exploring their own digital solutions. The central bank reiterated that CBDC development is not a race—it’s about meeting domestic needs securely and effectively.
Unlike decentralized cryptocurrencies, a CBDC would be:
- Issued by the central bank
- Backed by national reserves
- Legally recognized as legal tender
Because it’s state-backed, a CBDC would not face the volatility issues plaguing Bitcoin. It could integrate seamlessly into existing payment infrastructures and potentially support programmable money, offline transactions, and financial inclusion.
The central bank is currently conducting research and pilot tests to determine how a digital New Taiwan Dollar might fit into the country’s future payment ecosystem.
Tax Treatment: How Crypto Is Handled in Taiwan
The Ministry of Finance clarified tax policies based on asset classification:
- If crypto is deemed a security, trading may be exempt from business tax and securities income tax but subject to a 0.1% securities transaction tax.
- If classified as a digital good or service, it’s subject to business tax. Profits must also be declared under comprehensive income tax.
- If treated as a payment tool, it may fall outside business tax scope—but this classification is rare given current usage patterns.
Any future central bank digital currency (CBDC), being legal tender, would not be subject to taxation upon issuance or transfer, similar to physical cash.
Frequently Asked Questions (FAQ)
Q: Can I use Bitcoin to pay for things in Taiwan?
A: Technically yes, but very few merchants accept it. Most Bitcoin holders treat it as an investment rather than spending it.
Q: Is Bitcoin legal in Taiwan?
A: Yes, owning and trading Bitcoin is legal, but it is not recognized as legal tender. Crypto exchanges must comply with AML regulations.
Q: Why doesn’t Taiwan approve crypto ETFs yet?
A: Regulators are cautious due to market volatility and the high proportion of retail investors. Investor protection is the top priority.
Q: How is Bitcoin taxed in Taiwan?
A: Gains from crypto trading are generally taxable under comprehensive income tax. The exact treatment depends on how regulators classify the asset.
Q: Will Taiwan launch its own digital currency?
A: The central bank is actively researching a CBDC, but no launch date has been set. The focus is on security, usability, and financial stability.
Q: Is Bitcoin safer than traditional investments?
A: No. Bitcoin is considered high-risk due to price swings, lack of regulation in some areas, and cybersecurity threats. It should only be part of a diversified portfolio.
👉 Learn how to navigate digital assets safely in today’s market.
Final Thoughts: Bitcoin’s Role Today
Despite its revolutionary origins, Bitcoin’s primary use today is speculation—not spending. With 90% of activity centered on investment and trading, it functions more like a volatile digital commodity than a currency.
Regulators worldwide, including Taiwan’s central bank, stress that while innovation should not be stifled, consumer protection and financial stability must come first. As the line between investment and payment continues to blur, tools like CBDCs may offer a more practical path forward for digital money.
For now, if you're considering Bitcoin, understand its role: it's not your everyday cash—it's a high-risk, high-potential asset in a rapidly evolving financial landscape.