What is Bitcoin?
Bitcoin is a cryptocurrency, a form of currency used digitally to execute transactions by people and businesses all over the world. Bitcoin is not paper money like dollars, pounds, euro or yen. They are devoid of regulation as there is no centralized body to enforce regulations – there are no government authorities like the central banks to control the availability of money in the global market.
Bitcoin was invented by Satoshi Nakamoto (his identity is yet to be known) and was published in 2008. Bitcoin can be gotten online by using a set of computing rules to generate this cryptocurrency known as mining.
Bitcoin as a commodity
There has been a debate hovering over Bitcoin regarding whether it is a commodity or a currency. The head of South Korea’s central bank has made a claim that Bitcoin is a commodity and not a currency. Bitcoin as a currency has not been recognized despite its increasingly wide adoption for performing online transactions.
It is widely believed that Bitcoin is a commodity since its value will be hugely dependent on taxes, demand, and lawsuits. One of these determinants of Bitcoin as a commodity was exercised recently. The Commodity Futures Trading Commission, an agency overseeing derivatives, elements based on the price of an underlying good filed a lawsuit against a company that had been acting as a Bitcoin options market without complying with the federal rules.
"It is no surprise that the CFTC would exercise its jurisdiction over features and options trading of Bitcoin, as it does with any other commodity such as precious metals, foreign currency, oil or soybeans," said in a statement by the president of the chamber of digital commerce, Perianne Boring to the Washington Examiner.
According to Bloomberg, the commodity futures trading commission, in September 2017 declared Bitcoin as a commodity. Bitcoin has been treated as a property by the IRS as a property since a property nearly something of tangible value that can be held in the physical realm. The same tax policies and principles that guide traditional currencies is the same that controls this virtual currency.
Bitcoin Regulation across the World
With the rapid wave Bitcoin the Bitcoin has been generating across the world, it has generated lots of controversies across the world. Some governments have decided to opt out in adopting the cryptocurrency as a form of currency thereby leaving it deregulated.
Some of them issued warnings, that cryptocurrency should be disregarded as they perceive it as a fraudulent scheme. Amongst these happenings, some country has embraced Bitcoin as a form of payment. These countries have their own rules for using Bitcoin regardless of whether or not they are the official currency.
Bitcoin Taxation around the World
Like any investment, people who venture into the cryptocurrency space must also know the tax implications of their investment decisions. Perhaps the most important thing to keep in mind is that the IRS has determined that Bitcoin is property, not currency. You can buy and sell Bitcoin on a stock exchange, as well as physical currency conversion, by converting Bitcoin's wealth to US dollars in other national currencies, back to Dollars or Bitcoin.
In other words, the IRS treats the income or profits from the sale of virtual currency, such as Bitcoin, as capital assets, and is subject to short-term tax rates (ordinary income tax rate) or long-term tax withholdings. if the asset is maintained for more than twelve months (15% or 20%). income tax). By treating Bitcoin and other virtual currencies as property instead of currency, the IRS imposes extensive retention rules and substantial taxes on their use.