No doubt they will get their share, the IRS is hot on knowing how you spend your bitcoins and if it means revenue for them. But, they’re not alone other Federal Agencies are doing their research.
Will 2014 be the year we trade in our credit cards and abandon our wallets in favor of virtual currencies? If you follow the recent hype surrounding bitcoin, the trendiest of the new crop of digital currencies, you could be swayed into thinking that good, old-fashioned cash was going the way of the dinosaur.
According to The Wall Street Journal, over the course of 2013, the price of bitcoin rose from $13.50 to roughly $650, down from a high of $1,200 in November. By contrast, the U.S. dollar gained about 0.5% over the year, according to the ICE Dollar Index. Clearly, there is a growing interest in bitcoin. But it’s not just currency speculators, digital miners and early adopters driving the surge in interest. Regulators, banking institutions and tax authorities have also started paying attention to bitcoin and asking one big question: Who will regulate it?
This week, Wells Fargo called a “Bitcoin summit”, convening a group of finance executives, virtual currency experts and U.S. government officials to discuss the “rules of engagement” with bitcoin amid concerns that the currency could lead to money laundering and tax evasion. Wells Fargo chief executive John Stumpf was quoted:
“We want to make sure we understand what it is, what it does and what it does not… The world is changing and will continue to change. Whether bitcoin will be a big part of that, who knows?”
Exactly, who does know?
In December the Congressional Research Service issued a report Bitcoin: Questions, Answers, and Analysis of Legal Issues, which came to the following conclusion:
“Bitcoin raises a number of legal and regulatory concerns including its potential for facilitating money laundering, its treatment under federal securities law, and its status in the regulation of foreign exchange trading.”
And, more recently, when the Journal asked the IRS for its stance on bitcoin, the agency issued the following statement:
“The IRS continues to study virtual currencies and intends to provide some guidance on the tax consequences of transactions involving them. The agency is also aware of the potential tax compliance risks posed by virtual currencies.”