Regulatory and Tax Issues Posed By Convertible Virtual Currencies

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And the answer is – Property.

Not surprisingly, the question is how Convertible Virtual Currencies (CVCs) such as Bitcoin should be classified for tax purposes. Given the treatment of CVCs by the Financial Crimes Enforcement Network (FinCEN) in FIN-2013-G001, it is not surprising that the Internal Revenue Service also concluded that CVCs constitute property in the recently released IRS Notice 2014-21. The implications of this on U.S. users of CVCs are immediate and potentially very expensive.

In FIN-2013-G001, FinCEN distinguished between real currency, which is comprised of coin and paper money of the United States or other countries that is designated as legal tender by those countries; and CVCs, which are like real currency but do not have all of the attributes of real currency including legal tender status in any jurisdiction. FinCEN set out the rules applicable to transactions involving and parties to CVCs.

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Topics:  Bitcoins, FinCEN, Virtual Currency

Published In: Finance & Banking Updates, Science, Computers & Technology Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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