Rumours,
Court Cases and Taxing Times
Regulatory attitudes towards crypto
currencies around the world are shifting. Hardly a day goes by without a
central bank issuing a warning on the
digital currency.
However, it’s not all bad news – as some authorities are taking a much more
positive approach.
In CoinDesk’s regulation roundup,
Certified Public Accountant and ACFE Certified Fraud Examiner Jason Tyra
examines the most significant digital currency news from the world’s regulators
and law courts over the past two weeks.
USA:
Bitcoin is property, says IRS
The US Internal Revenue Service issued a
notice in late March that classified bitcoin as property for purposes of
taxation, clarified that mined bitcoins are taxable at
the time they are received, and specified that bitcoins received in connection
with a trade or business or as wages are subject to withholding and/or payment
of Medicare or social security taxes.
The reaction among US bitcoiners was
mixed. Treatment as a capital asset grants access to preferential capital gains
rates for bitcoins held longer than a year and a day, but imposes the burden of
tracking basis and gain for every bitcoin received or spent.
This is good news for US taxpayers using
bitcoin as a store of wealth, but terrible news for those who might use it as a
means of exchange.
The subtleties and implications of the
IRS notification are likely to fuel debate among US bitcoin enthusiasts for
months to come: for example, the IRS did not specify whether taxpayers
exchanging bitcoins for other crypto-currencies would be entitled to defer
taxable gain under like-kind exchange rules.
Rejection of non-functional (otherwise
known as ‘foreign’) currency treatment by the IRS has also created uncertainty
as to the implications, if any, for FinCEN’s designation of bitcoin as a
monetary instrument.
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USA:
Texas following NY example?
The Texas Department of Banking released
a letter this week addressed to “virtual currency companies operating or
desiring to operate in Texas” that declared that, “because cryptocurrency is
not money under the Money Services Act, receiving it in exchange for a promise
to make it available at a later time or different location is not money
transmission” in the state.
However, since the Texas Department of
Banking is a state-level agency, its declaration has no impact on FinCEN’s
federal registration requirements.
Texas has aggressively cultivated a
business-friendly climate in recent years, poaching a number of high-profile
companies from higher tax and higher regulation states. Austin, Texas is
especially well known as a progressive hub for technology companies, including
many bitcoin startups.
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