As we have been saying for months now, the biggest challenge faced by bitcoin proponents is their own unwillingness to accept minimal regulations that would shore up the flagging value of their virtual currency. Now a Bloomberg writer reports that the IRS has decided to treat bitcoins as property rather than currency:
The Internal Revenue Service has decided that Bitcoins are more like shares of a tech company than the money in your checking account, at least when it comes to taxes. Anyone who spends Bitcoins (or Dogecoins, for that matter) will now need to pay capital-gains taxes based on the difference between the value of the coins at the time they were acquired and their value at the time of the transaction.
That’s different from the way other paper currencies are treated. If you find someone in the U.S. who accepts paper euros or yen and uses that currency to purchase goods and services you don’t really need to worry about changes in exchange rates for tax purposes.
Of course, this development is being portrayed as a sensible, yet temporary, work-around, but it merely reinforces our bearishness on bitcoins. Just three weeks ago, world-famous investor Warren Buffett declared that bitcoin “is not a currency.” That followed weeks of bad news as bitcoin exchanges were shut down in the wake of hacks and bitcoin “mining” malware was found on hundreds of thousands of computers.
We suggest the IRS is correct to treat bitcoin as a thing people own rather than a liquid currency, and we would not consider bitcoins a promising investment vehicle. They seem more of a hobby for billionaires, organized crime, and technology lovers.