Internal Revenue Service Defines Bitcoin As A Physical Commodity
The more popular Bitcoin becomes amongst global consumers the higher the chance that governments and global banking systems will step in to ruin the party. As we reported more and more governments are reacting to the phenomenon of virtual currencies like Bitcoin by implementing regulations and restrictions instead of working towards helping the consumer.
Japan reacted to the demise of the Japanese based Mt. Gox Bitcoin exchange by simply deciding to redefine the currency as a commodity like gold or silver. This seems to be absurd as no matter how you define Bitcoin consumers are able to utilize the virtual “commodity” exactly like real currency in every which way. We have reported on the many options consumers have as more and more retail establishments, hotels and other businesses are embracing virtual currencies.
Not surprising the U.S. has up to now waited on the sidelines as they decide on how to behave with Bitcoin. The U.S. government’s Internal Revenue Service (IRS) have just entered the fray defining Bitcoin and any other virtual currency as a property or commodity which will be subject to federal tax law.
This in essence follows the Japanese model which downgrades Bitcoin from a virtual currency to a physical commodity which is now subject to taxation. In a statement th IRS went on to say,” In some environments, virtual currency operates like ‘real’ currency — i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance — but it does not have legal tender status in any jurisdiction.”
It remains to be seen how the rest of the world will react to the growing popularity of Bitcoin. The dream of a currency with no regulatory body restricting transactions and offering significantly reduced transaction fees seems to becoming a challenge as both banks and governments are threatened by the very idea of not controlling our financial behavior.