Ever since the introduction of digital currency into the world economy in 2009, many investors nervously awaited news from major world governments as to how the new fiscal instruments would be officially viewed and regulated in their respective countries.
The United States was no exception, and the government remained silent on the topic for nearly five years. After all, if the US had officially declared cryptocurrency illegal—though experts didn't consider that a likely outcome—it would have delivered a crushing blow to the new and growing industry.
The other shoe dropped, so to speak, on March 25, 2014.
The United States Internal Revenue Service (IRS) weighed in with the first official governmental guidelines for cryptocurrency.
Essentially, the IRS stated they don't regard digital currency as an official legal tender currency—such as the US dollar—but, for tax purposes, it should be treated as property. At its heart, this ruling means that investors in digital currency must pay capital gains taxes on any profits they receive from their investment—much like that of a stock portfolio.
Conversely, any investment losses incurred can be written off, and would not be taxed. Finally, businesses who accept digital currency as payment for goods and services must report taxes on those transactions, which are considered income in the eyes of the IRS. Cryptocurrency advocates would have preferred official currency status, of course, but nonetheless the IRS' decision does assign some legitimacy to alternative currencies in the US.
As we all know all too well, tax code in the US is a fluid and constantly-changing field.
The IRS decision cited above is likely to be only the first regarding cryptocurrency—and more announcements are likely to come as the industry grows and matures. Coin Pursuit will monitor the situation, and will update this section as circumstances change.
We have also researched and compiled a comprehensive chart that shows how Bitcoins (and, in effect, all other types of digital currency) are regarded in all the countries of the world. This chart, too, will be updated as more countries express their official opinions on the use of cryptocurrency.
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