IRS to Regulate Bitcoin as Property

The U.S. Internal Revenue Service announced last week that it will treat Bitcoin as a form of property for taxation purposes, in what is one of the first major U.S. regulations of the virtual cryptocurrency. As a result of the decision, Bitcoins would be subject to capital gains taxes when sold, Bitcoin miners would be required to report their mined Bitcoins as income, and online exchanges would be required to furnish their users with annual transaction reports. 

The decision seems at odds with the anonymous nature of Bitcoin, which by its nature is decentralized and difficult for governments to regulate. However, it reflects the growing acceptance of the currency as an alternative to traditional legal tender, especially in the venture capital markets where it has found champions like Tyler and Cameron Winklevoss (of Facebook ownership dispute fame). For gamers, however, the decision may hit a bit closer to home as BitCoin seeks to find acceptance as a currency for microtransactions in online social gaming. Under the new IRS regulations, if a user purchased an in-app or in-game purchase using Bitcoin, they would be expected to calculate the difference between the value of the Bitcoins at the time they were first acquired, with the value of the Bitcoins at the time they were spent, in order to calculate capital gains/losses. Game developers seeking to accept Bitcoin as a payment model would also be required to do the same, resulting in a significant increase in time and effort spent to comply with the law, and theoretically making it less likely that U.S. consumers will use Bitcoins as a mainstream currency. And given the wild price fluctuations of Bitcoin, from as high as $1000 to as low as a few cents per coin, the regulations may encourage more hoarding than spending of the currency. 

Would you use Bitcoin or other cryptocurrencies to pay for microtransactions in a game, or even to purchase entire games themselves? Let us know in the comments. 

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