US Internal Revenue Service Deems Bitcoin to be Property

The US Internal Revenue Service (IRS) has announced that it intends to treat Bitcoin, the computer-driven online money system, as property rather than currency for tax purposes.

Although many users already treat Bitcoin like a currency, the IRS ruled that “it does not have legal tender status in any jurisdiction.”

Following the announcement, Tom Carper, Democrat senator for Delaware, praised the agency’s decision. The guidance “provides clarity for taxpayers who want to ensure that they’re doing the right thing and playing by the rules when utilising Bitcoin and other digital currencies,” he said.

However, the IRS could reduce the volume of transactions conducted with the virtual currency, said Pamir Gelenbe, a venture partner at Hummingbird Ventures, which invests in technology businesses. “It’s challenging if you have to think about capital gains before you buy a cup of coffee,” he commented.

Charles Allen, chief executive officer (CEO) of online marketplace BitcoinShop, said he’d like to see the IRS reconsider its decision as virtual currencies develop.

“The implications this decision will have on the Bitcoin ecosystem are far reaching, and will be burdensome for both individual users of Bitcoins, Bitcoin-focused business and for the general adoption of virtual currencies,” he said, adding that Bitcoin users will adapt to the rules.

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