After a lot of ups and downs, it would seem that Bitcoin is here to stay. Now IRS has ruled that for tax purposes, it will be treating Bitcoin as a property and not as a currency.
The decision is certainly not welcome for the Bitcoin community. It brings the virtual currency into the fold of the taxation system so that Bitcoin will no longer afford a lot of anonymity to anyone. This directly impacts the nature of the currency since Bitcoin was originally envisioned as a way of making anonymous digital payments.
The decision by IRS means that anyone investing in Bitcoin will be the same as a regular stock investors, and the same rules will apply to him/her. Moreover, all Bitcoin miners are now required to report their total earnings as taxable income and file it with the IRS. In fact, IRS is looking to receive tax on similar transactions in the past as well.
The virtual currency had had a free run for a while, with some considering it the final answer to anonymous online transactions without any meddling by the government. But that is changing fast. With anonymity as well as freedom of Bitcoin curtailed, it is now a lot different from the currency it started as.
Charles Allen, CEO of Bitcoin Shop, sums up the reservations of the community in these words, “The implications this decision will have on the Bitcoin ecosystem are far reaching, and will be burdensome for both individual users of Bitcoins, Bitcoin-focused business and for the general adoption of virtual currencies.”