Anybody got change for a bitcoin?
Yes, bitcoin. It’s that newfangled Internet currency which is all the rage. It’s actually a digital currency, which means it isn’t real (just like your fantasy football team members or their accompanying stats) and you can’t carry it in your wallet. That’s great because you can’t accidentally damage it in the washing machine either. You can get robbed, but you won’t get your skull broken in like the old traditional way. At least that’s something. More on that later.
People can get online accounts and buy bitcoins and use them to pay for things. But you can still get robbed. Since your bitcoins reside somewhere in the “cloud” on the Internet, that means hackers can get to them and steal them from you. So much for saving money for a rainy day. As soon as a hacker sees your bitcoin money on the cloud, he’ll take your silver lining.
The only advantage here is that nobody threatens you with a crowbar or puts a gun upside your head before taking them. I guess that’s some relief.
So what’s the advantage to buying and owning bitcoins? Well, for one thing, you can use them more and more to buy ordinary everyday things over the Internet like electronics, airplane tickets, books and launder money for illegal drug activity. But mostly for laundering money for illegal drug activity.
And what criminals especially love is that transactions are non-traceable. Since it’s not really legal currency, no country can effectively regulate it. Of course, that also means its value is not backed by the full faith and credit of any government either. But since most major governments in the world are deeply in the red, I don’t really see how that makes one scintilla of difference anyway.
You might have guessed that since bitcoins have all these advantages like being non-taxable, that might have attracted the attention of some governments’ internal revenue bureaus. And you’d be absolutely right too.
One thing’s for sure. Whenever there’s something to be taxed, the government will find a way to do it. And bitcoin is no exception. In fact the IRS recently ruled that bitcoins are property not currency because they are not fungible. (I’ll pause while you look up that word in the dictionary.)
In other words, that’s the IRS way of saying, “You really didn’t think you’d get away with that, did you fella?”
So effectively if you buy some bitcoin and use it to pay for a cup of joe at the Starbucks, you must now calculate how much you paid for your bitcoin and then based on the amount of bitcoin you used to buy the coffee with, figure out what your capital gains (or losses) were from the transaction and report it to the Treasury like a good little boy. And this would apply to any transaction you make with the currency you probably can’t see or touch. I sense a massive migraine headache coming on.
I guess most of you don’t care one bit about bitcoin, but that’s my two cents worth. I would continue, but I think that sounded a little too “coiny.”