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Internal Revenue Service Rules Bitcoin as Property Not Currency

March 26, 2024         By: Kevin Xu

With governments still mulling over the frameworks of regulating bitcoin and digital currencies at large, the United States’ Internal Revenue Service has ruled that bitcoin will be ruled as a property.

What does this mean for bitcoin enthusiasts, merchants, and investors?

Since bitcoins are property and not treated as a currency, personal transactions and gains must be kept track of and will be subject to capital gains taxes.

As it stands, anyone who has paid or has been paid with bitcoin must report it, and assign the value of the bitcoin at the price at which it was received in U.S. dollars.

Bitcoin miners, people who use computing power to solve complex algorithms and are rewarded with bitcoin, will have to report their bitcoin gains as self-employment income.

In practice, if you’ve bought bitcoins but haven’t sold them, you don’t owe taxes since gains or losses weren’t realized.

As for usage as a currency, this does put some roadblocks in place towards practicality, since both merchants and consumers need to report the bitcoins that were spent and paid.

It appears that the IRS is opening the doors for Wall Street and investors to deal in bitcoin, since this ruling would essentially treat anyone involved with bitcoin similar to stock investors.

The full ruling can be seen here.