Should The Government Classify Bitcoin as A Legal Currency?

In November 2018, the U.S. government proposed a new bill that would classify virtual currency as a commodity, not an investment, for tax purposes. This is significant because it would help determine how to regulate cryptocurrencies and what investors stand to gain or lose when participating in digital currency platforms. In terms of law, there are currently no regulations on the use of bitcoin.

If you are in the United States and want to use Bitcoin, then you should know that it is not regulated by law. This means that there are no rules governing its use. The same goes for other countries like Singapore and India, which also have no laws regarding this cryptocurrency.

However, there is one country where Bitcoin is still regulated, and that country is China. In January 2018, China banned ICOs (Initial Coin Offering) from operating within its borders due to fears of money laundering using cryptocurrencies like bitcoin. 

Should The Government Classify Bitcoin as A Legal Currency?

The Bank Secrecy Act requires financial institutions to report cash transactions exceeding $10,000. But it’s not clear whether this applies to bitcoin. According to the IRS, bitcoin is the property and not currency. The agency has issued guidance on reporting bitcoin transactions and how long they should be kept in records.

The Internal Revenue Service has called bitcoin property, not currency.

The IRS has called bitcoin property and not currency. The Internal Revenue Service treats bitcoins as capital assets like stocks or real estate, not money. According to the IRS, you can buy goods and services with bitcoins only if you use them as part of barter transactions. If you’ve paid in bitcoins, they are treated like other forms of income. They are taxed as ordinary income when received and taxed again when spent on goods or services subject to sales tax.

The IRS hasn’t issued guidance on the taxation of bitcoin transactions, yet everything is still subject to debate by lawmakers and regulators alike. There are three bills in Congress right now. 

The first, “The Digital Dollar Act,” would make it easier for Americans to buy bitcoin and other cryptocurrencies by giving them access to a bank account with their local Federal Reserve Bank. This would allow the U.S. government to regulate crypto exchanges and prevent users from accidentally sending crypto funds overseas without paying taxes.

The second bill, “Cryptocurrency Tax Fairness Act of 2019,” would create an exemption from capital gains taxes when investing in cryptocurrency. Users who frequently trade do not pay as much as 15% tax on their profits as they would if they invested in stocks or bonds.

Finally, there’s Bill HR 2910: “FinCEN Improvement Act,” explicitly designed to prevent money laundering through cryptocurrency exchanges by requiring these platforms to adhere to Know Your Customer (KYC) requirements. The same banks must follow before opening accounts or transferring money between countries and reporting suspicious activities related to terrorism financing or drug trafficking.

Even if a bill passed in Congress, things could get complicated given that currencies fall under the jurisdiction of the Treasury Department and the Federal Reserve Board. The former has been mum on its position about bitcoin. However, it’s possible that the latter might not be keen on seeing bitcoin classified as legal tender.

Several countries have issued guidance regarding their treatment of virtual currencies, most notably Canada and Singapore. They have determined that virtual currency intermediaries such as exchanges require licensing from applicable regulators.

A single bitcoin costs more than $869 and is worth more than all the other virtual currencies combined. While the government does not issue bitcoins, it does regulate them. The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has been careful to classify bitcoin as a virtual currency and not as legal tender, which means you can’t write checks in bitcoins or use them at ATMs. You also can’t use your credit card to buy bitcoins. They’re not considered money in the traditional sense.

Conclusion

People can use bitcoin in developing nations that don’t have access to traditional banking services. It can provide economic stability in countries experiencing inflation problems or other financial crises.