The European Union has passed no specific legislation relative to the status of bitcoin as a currency, but has stated that VAT/GST is not applicable to the conversion between traditional (fiat) currency and bitcoin.

VAT/GST and other taxes (such as income tax) still apply to transactions made using bitcoins for goods and services. ^{[3]:European Union}

In October 2015, the Court of Justice of the European Union ruled that "The exchange of traditional currencies for units of the 'bitcoin' virtual currency is exempt from VAT" and that "Member States must exempt, inter alia, transactions relating to 'currency, bank notes and coins used as legal tender'", making bitcoin a currency as opposed to being a commodity.^[4][5] According to judges, the tax should not be charged because bitcoins should be treated as a means of payment.^[6]

According to the European Central Bank, traditional financial sector regulation is not applicable to bitcoin because it does not involve traditional financial actors.^[7]:5 Others in the EU have stated, however, that existing rules can be extended to include bitcoin and bitcoin companies.^[8]

The European Central Bank classifies bitcoin as a convertible decentralized virtual currency.^[7]:6 In July 2014 the European Banking Authority advised European banks not to deal in virtual currencies such as bitcoin until a regulatory regime was in place.^[9]

In 2016 the European Parliament's proposal to set up a taskforce to monitor virtual currencies to combat money laundering and terrorism, passed by 542 votes to 51, with 11 abstentions, has been sent to the European Commission for consideration.^[10]