Virtual currencies (often called cryptocurrencies) such as bitcoin are perhaps blockchain's best-known application. As these and other blockchain-based digital assets become more common, and attract more regulatory and legislative attention, it will be crucial to keep up with the latest guidance—particularly given the often counterintuitive consequences of transacting with cryptocurrency for tax purposes. Since current tax law is limited to a single statement of sub-regulatory guidance published in 2014, however, taxpayers presently have more questions than answers.

This Jones Day White Paper will discuss briefly the technical and legal background of blockchain technology and cryptocurrencies, highlight key issues under the current (limited) tax regime for cryptocurrencies, and identify selected open issues that are creating some of the most uncertainty for taxpayers.