Bitcoin to be counted as property not currency by the IRS

The US government has announced that Bitcoin is officially not a currency.

Bitcoin, along with all other virtual currencies, will be classified as property and not currency, according to the US Internal Revenue Service (IRS).

In a statement the IRS said: "The notice provides that virtual currency is treated as property for US federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency."

The ruling marks another step in the wider attempt to make Bitcoin become mainstream but at the same time it may cause problems for Bitcoin owners.

 

For example, under the ruling, Bitcoin owners will now have to keep track of the value of their bitcoins in US dollars. For example, if someone paid for a drink in Bitcoin, this would now be taxable with the onus on the buyer to work out if they had made any capital gain on the asset they had just sold.

Earlier this year the UK’s tax office, HMRC, scrapped its plans to tax Bitcoin trading after Mt Gox, Bitcoin’s largest exchange collapsed and lost almost $500m worth of Bitcoin to hackers.

The recent issues have not appeared to faze Chairman of the Bitcoin Foundation, Peter Vessenes who has kept his faith in the success of the virtual currency.

Speaking at this year’s Festival of Media Asia Pacific before the IRS announcement, Vessenes said: “Digital currency is definitely sustainable; people are using it all the time. This year we’ll have multi-billions of dollars of financial transactions happening.”

Watch the interview with Vessenes at the Festival of Media Asia Pacific this year:

 Laura Bracher, London

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