Plan to Launch 1,000 US Bitcoin ATMs Collapses Amid Alleged Misconduct

A previously announced business partnership between BitXatm and CryptVision that would have resulted in the launch of 1,000 bitcoin ATMs in the US has been dissolved.

First revealed on 20th July, the deal made CryptVision the exclusive provider of BitXatm bitcoin ATMs in the US and Canada. At the time, Los Angeles-based CryptVision aimed to establish itself as one of the more prominent bitcoin ATM operators in North America, while Germany-based BitXatm aimed to further its presence outside of Europe.

The news was first detailed in an 8th September blog post published by BitXatm that announced it would withdraw from the partnership, effective immediately, alleging that CryptVision “never conducted any organized effort to secure new customers as stipulated by the agreement”.

BitXatm wrote:

“Refusal of CryptVision’s management to act in good faith and respect legal obligations arising from our partnership agreement left BitXatm with no choice but to terminate the collaboration and remove any right of representation from CryptVision.”

Speaking to CoinDesk, CryptVision president Sergey Yesayan was equally critical of the actions of his company’s former partner.

“We have been deeply disappointed with BitX[atm]’s behavior and its demonstrated unwillingness to deal ethically with CryptVision,” he said.

CryptVision confirmed that it is still seeking to launch a fleet of bitcoin ATMs in North America, while BitXatm has pledged to announce further expansion plans in what it has called a key international market.

Moving past the partnership

Representatives from both parties suggested that, while the split was not amicable, neither intends to pursue legal action.

Catalin Tincu, co-founder of BitXatm, told CoinDesk:

“Our intention is to put behind this unfortunate event, to take care of our customers and prospects in US. We are not here to tarnish CryptVision reputation, we just present ‘the ugly truth’ and is not our fault that CryptVision put themselves in such position.”

Tincu went on to claim that while it has “strong evidence of [CryptVision's] lack of honesty and business ethics”, it is not willing to make the information public at this time. BitXatm has asked potential business partners that may have been in touch with CryptVision to contact it directly.

CryptVision is represented by Pillsbury Winthrop Shaw Pittman attorney Marco Santori, who recently joined Blockchain as its global policy council. Santori declined to comment on the partnership or BitXatm’s statements, but indicated CryptVision is excited to move on to upcoming business.

Announcements upcoming

Both companies indicated their willingness to move on with their larger plans, albeit independently.

For its part, Yesayan indicated that CryptVision intends to rebrand its company; that it is considering building its own proprietary bitcoin ATMs and expects to have forthcoming announcements. Yesayan claimed the rebranding was necessary, citing a dissatisfaction with how the name may reflect its larger goals. CryptVision’s former website is no longer active.

In turn, Tincu told CoinDesk that he is optimistic that BitXatm will be able to move forward with its formal plans for entering the US market, adding:

“We were contacted by few companies from US interested in taking over what supposed to be CryptVision’s part in this partnership, and is very possible for us to conclude this new partnership in upcoming weeks.”

Robocoin Launches Custom Bitcoin Wallet Targeting Underbanked

Robocoin has announced the launch of a custom bitcoin wallet for consumers called the Robocoin Wallet.

The move finds the Las Vegas-based bitcoin services company in the midst of its ongoing evolution away from the bitcoin vending machines that dominate the bitcoin ATM market and toward a global remittance and bitcoin banking platform it calls “Robocoin 2.0″, first announced in June.

Speaking to CoinDesk, Robocoin CEO Jordan Kelley indicated that the Robocoin Wallet will allow the company to bring more of the essential services for its planned bitcoin banking and remittance network under its direct supervision – a step that will be key in helping the company ensure its service remains as user-friendly as possible.

Kelley said:

“What we’re talking about is a fully enterprise, fully functional global wallet with a full kiosk and bitcoin ATM built into it. What that means for customers is it’s no longer about having to have your external bitcoin wallet and having to be at the whims of the existing bitcoin infrastructure.”

Kelley indicated that the wallet is essential to creating a harmonious experience for Robocoin users across its web and mobile platforms.

Emphasising cash advantage

Kelley explained that the principal selling point unique to the new product is the ability for wallet users to instantly convert bitcoins to cash at its locations around the globe:

“Now, if I want some cash, I’m no longer sending bitcoin to the machine and waiting for the confirmation and then going back and scanning a receipt. All I’m doing is I walk up to the machine, tap ‘withdraw’, I pick how much money I want and it instantly cashes out.”

Robocoin’s wallet will be initially available to all of the company’s existing users, who can sign up on the company’s website. New customers can sign up from Tuesday at the company’s ‘Robocoin Branch’ (ATM) locations in Los Angeles, Mountain View and Las Vegas, and soon after at branches worldwide.

Removing barriers to entry

The new product is part of a broader move by the company to use its Robocoin ATMs as an onramp to the digital currency ecosystem. As such, Kelley told CoinDesk that it is looking to develop a suite of in-house solutions that free it from third-party relationships that have in the past created operational difficulties.

Kelley described early interactions between customers and bitcoin ATM operators as falling short of the intended user experience, as operators struggled to explain transaction delays from major exchanges to new users.

He recalled:

“There was just so much stuff outside of our control and really the customers were the ones that had the [poor] experience, and really Robocoin [too], since we’re the ones who had to deal with the support.”

By delivering a wallet secured by two-factor authentication and with SMS money-sending capabilities, the company now aims to improve the wallet experience as well, as customers will no longer need to protect their private keys or navigate complex addresses.

In addition to its consumer wallets, Robocoin kiosks will also be powered by the company’s previously announced operator wallets, which use an API to automatically replenish funds purchased from exchanges.

Remittance network still in progress

Kelley also discussed the progress his company has made in the months since first announcing its ambitions to pivot toward positioning itself as more than a bitcoin ATM operator and service provider.

Notably, Kelley suggested that, despite his company’s aspirations, he believes capitalizing on his company’s vision for a global remittance network is still far off.

However, he believes Robocoin has the tools to capture this market, saying:

“It would be very difficult to imagine a remittance population sending bitcoin or sending money to and from private keys, so honestly we’re not seeing remittance, but we believe we can beat Western Union on the fees – we can certainly beat them on the customer experience.”

Kelley concluded by reiterating his belief that Robocoin will one day be able to make more effective commerce possible for the millions of underbanked consumers around the world, and that the firm remains committed to capturing this market segment.

Bitcoin Price Regulation and the CFTC

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The Bitcoin Price has continued its East-by-Northeast trajectory into month-end before declining to retest week-long support near $400. The US Commodities Futures Trading Commission (CFTC) has announced that it will be holding a meeting on October 9 to discuss its jurisdiction in relation to Bitcoin.

The indicators imply not in the current wave: MACD is going into reverse divergence (which will force a downward correction) and RSI is showing the same – including touching its upper Bollinger Band which warns trade may turn down again. The larger timeframes (hourly and 4-hourly) still have plenty of room to move up, so one possibility is that price action returns to the orange trendline before reattempting $410. Another possibility is dipping back down below the orange support, but we’ve been down there already – with strong downward momentum – and buyers repelled the decline. Let’s see.

Update 06h40 UTC

This update is written prior to the opening of the US trading session with price testing the lower supporting trendline – having breached it on the Bitstamp chart. A dip to $397 was followed by a pullback to $400 but should decline resume we have targets in the $360 price area. The chart below shows where an older 3.618 Fib extension coincides with a 2.618 Fib extension derived from the current wave of decline. Today’s CFTC announcement is a necessary procedural affair but has no long-term impact on Bitcoin – for the many Bitcoin ETFs, yes – however, market participants may just use it as an excuse to resume short-selling the Bitcoin exchanges. Upside, if the market wants it, has plenty of room for advance to $465.

Bitcoin Price Movement Cautious 00h30 UTC

The Bitcoin price has, across exchange charts, traded sideways with a late dip to the lower rising trendline that has been supporting price action. Trade has traced an aggregate path that remained equidistant to two converging trendlines, annotated in solid orange and solid blue on the following 15-minute Bitstamp chart.

The significance of trendline convergence is that the apex, where the lines meet, often serves as a reaction zone in time. We may see price trade sideways into the conversion zone, or it may break out across either trendline – only to reverse in the opposite direction when it meets the apex in the future. As the 4-hour Bitstamp chart shows the trendlines converge in October. Analysis will document the apex reaction on the day.

CFTC Bitcoin Regulation

Today may see some strong movement in the Bitcoin price as news spreads of the CFTC announcement of its planned public meeting regarding its “jurisdiction with respect to derivatives contracts that reference the digital currency bitcoin.”
The topic of regulation has frequently featured in the CCN news pages and also in these analysis articles.
There is little critical debate around the matter of regulation in the cryptocurrency community. The pro-regulation camp argues from two mistaken beliefs about the benefits of regulation:

1. regulation will eliminate Bitcoin price volatility
2. regulation will prevent theft and malpractice by exchanges

Bitcoin Price Volatility

The matter of volatility seems to irk many critics of Bitcoin – including those Bitcoin users who feel that the volatility is somehow a “bad thing.” The argument is made that until Bitcoin’s price stabilizes it could never function as a “serious” currency.
On what material fact is this assumption based? On the Wikipedia entry for “Reserve Currency,” perhaps? It may be true that price stability is a requirement of a reserve currency, however, is Bitcoin’s design purpose really to be reserve currency?
The relative stability of most fiat currencies is not inherent but is, instead, achieved via active – and non-stop – central bank manipulation. Regulation does not (and never has) stabilized any financial instrument or currency. That regulation could somehow remove volatility from a freely traded Bitcoin market is merely wishful thinking on the part of those who want to see a stable Bitcoin price chart.

Centralized Regulation of Bitcoin

The core principle that makes Bitcoin work is its decentralization. Everything that comprises the Bitcoin network and protocol is decentralized: its consensus mechanism, its nodes, its development model, mining, the blockchain, and so forth. Any system that wants to interact with the Bitcoin protocol needs to recognize and adapt to its decentralized nature. Efforts to centralize any aspect of Bitcoin will, therefore, be discarded by the Bitcoin network in favor of mechanisms and ideas that are more decentralized.
The dilemma (actually, the irrationality) which confronts efforts to regulate Bitcoin is apparent: how is a centralized body able to regulate a decentralized network? Besides being a known participant in the failures of the existing financial hegemony, how will a third party commission be able to effectively dictate rules and parameters to a complex decentralized entity such as Bitcoin – owned and controlled by no-one? The absurdity of the proposition defies explanation.
What Bitcoin will do is to gradually eliminate all centralization and “authoritative” trust in its path. All centralized systems and trusted authorities, including Bitcoin exchanges, will give way to the tide of decentralized consensus that Bitcoin both enables and embodies.

Who Stands To Benefit

It has already been argued that Bitcoin cannot be regulated – that the idea is illogical. Those Bitcoin users who call for regulation are mistaken about the nature of regulation and its efficacy in the real world – never mind its logical incompatibility with Bitcoin. Furthermore, there are politicians and Bitcoin entrepreneurs who campaign – who lobby – for regulation. Regardless of the logical dead-end of their objective, they must be pursuing regulation for a reason. The reason is that they stand to benefit: from perceived control and the perceived credibility endowed upon their venture by the stamp of approval of some centralized “official” authority.
In the end, it means nothing for Bitcoin and its continued use. Even so, market participants will react to today’s CFTC announcement of a planned meeting to discuss whether or not it has jurisdiction over Bitcoin derivatives in cyberspace.

Economic Data and Announcements

There was a Bitcoin jackpot for some, yesterday, when the Huobi exchange accidentally paid 920 BTC to the wrong Bitcoin addresses in an accounting department error.
Later today, US quarterly GDP data will be released, as well as University of Michigan Consumer Sentiment figures.

Friday 26 September

12h30 UTC US Final GDP (quarterly)
expected: 4.6% (previous: 4.2%)
13h55 UTC US Revised UoM Consumer Sentiment
expected: 85.1 (previous: 84.6)

CCN

CCN hosts a summarized Economic Calendar showing the week’s main data releases.
Updates to this article will be made during the European and US trading sessions should any significant events come to light.
Disclaimer
The writer is fully invested in Bitcoin via BTC-e and Bitfinex. Trade and Investment is risky but not as risky as some other things out there. Take care only to take action in the market when you are 100% sure of the outcome. CCN accepts no liability whatsoever for losses incurred as a result of anything written in this Bitcoin price analysis report.
Bitcoin price charts from TradingView.

Bitcoin Price Analysis: Is the Bitcoin Price Still Going Down?

Bitcoin price has been consolidating in a range between $525 and $485 during the past week. Daily updates have highlighted the ambiguity of trend. Are we at the start of a new uptrend or is the decline still in force – just pausing before the dive? An infrequent technical event has manifested in the form of a moving average cross-over and, as discussed below, it provides us with a timely canary in the coal mine.

New CCN Bitcoin Price Analysis Format

A new schedule for technical analysis reports has been adopted. A weekly in-depth report will be published every Sunday, and provide an overview of expected price action for the coming week or month. From Monday to Friday, daily updates will track the market’s progress and discuss significant market movements and events.

Ambiguous Bitcoin Juncture

The Bitcoin price chart is still pointing down. Until there is technical evidence of a new uptrend, the assumption is made that the decline is still in force. In this view, targets await in the low $400s, low $300s and around $160. We may not see all of them and only time will tell if we reach them via gradual decline or flash spikes to the downside.

Despite having convincingly struck the 1.618 Fibonacci extension downside target, calling a bottom at the recent low ($440 on Bitstamp) would be premature. It may be the bottom, but there would have to be confirmation of a new uptrend before we can call the eight-month long decline over. Let’s explore this view for a minute. The Bitstamp chart will be used as reference.

The alternate count (annotated in blue on the chart above) shows the interpretation whereby an uptrend had begun from label “C” in early April 2014. Its present reversal point is at blue label “2”. If we consider the low of 18 August as the end of the wave 2 decline then, the wave up from $440 to $534 will be the first wave of advance of the powerful wave 3 of the supposed uptrend. The subsequent retracement to $485 would be counted a wave ii. Second waves are typically three-wave zig-zags and the price action on the chart matches this description for both wave 2 as well as the current wave ii of wave 3. The current wave ii has also retraced 50% of the advance from the $440 low – which is sufficient for this interpretation.
So, we have evidence of a new advance, but it’s not conclusive yet. We would expect price to either make additional lows (without dropping below $440) or to advance from current levels. The nature of the advance would have to be strong, with long green candles, in character with a third wave, and it would have to reach $590 before displaying any sideways action.
The challenge is that this sequence of waves does not confirm anything because it is exactly the path that a retracement of the decline would make from the low at $440. An a-b-c zig-zag from $440 to $590 exactly resembles the confirming wave i-ii-iii combination we expect to see and we’d be none-the-wiser, having to wait for price to churn sideways around $590 and then to advance above $600 – thereby confirming advance – or price could reverse meaningfully from $590 and drop to lower lows – to our existing decline targets below. Hence, advance to $590 doesn’t prove anything and only subsequent price action will clearly show what the larger trend really is.
Sunday trade has drawn price back below $500. As can be expected over the weekend, trade is light and equal numbers of bulls and bears are placing orders above and below price. Except for a bot-gone-wrong over at BTC-e, its quiet weekend trade so far… with a question mark, as discussed next.

Bitcoin Moving Averages

The following study looks at the BTC-China chart in the light of its 200 period moving average (MA), as well as the 1000 period MA. Additionally, the 200 MA has envelopes drawn at a range of 10% above and below price. This exercise yields interesting results at all timeframes but on the 4-hour chart, an anomaly shows up.
On the chart below, notice the tendency of price to “stick” to the 200 MA. We also see that price respects the 10% range envelope (blue), often ranging within the envelope and at other times using the envelope as support/resistance from outside.

Whenever price strays out of the blue envelope for too long, it tends to snap back to the 200 MA and sometimes crosses over the 200 MA as a racing car does when the driver over-compensates steering to get back in the racing line. In most instances, after having traded outside the blue envelope, price snaps back to the 200 MA at its centre at least once – except for the two instances circled in magenta.
In both instances price action had traded outside the 200 period moving average envelope, subsequently returned inside the envelope but without touching the centre line. In one instance price proceeded to make a regional high and in the other a decline low. This phenomenon is present at the same junctures in all the BTC charts.
Direct inference that this past occurrence is what we are witnessing in current price action would be reckless. However, what we do have is a useful bellwether for what may follow. Should price drop through the bottom envelope line we can expect lower lows. Should it bounce off of the envelope bottom then we can expect it to return to the 200 MA centre line – at least – or in the event that price should cross over the 200 MA we can expect it to head – at a minimum – for the higher envelope line near $590.

As mentioned in the introduction to this report, an ominous MA cross-over is eclipsing upside hopes: the red 200 MA is in the process of crossing over the 1000 MA whilst both are slanting downward – a strong signal of at least one additional low.

Conclusion: Is the Bitcoin Price on its Way Down?

The direction of the trend is still assumed to be down. Although there are signs that a potential reversal may have occurred at $440, we lack confirmation of a new uptrend. Ironically, the very confirmation we seek will end up proving nothing, due to the awkward confluence of the advance target with an existing decline trendline at $590, as well as the permissible structural overlap of an A-B-C corrective wave with the first three waves of advance.
A Moving Average study reveals a bearish cross-over of the 200 MA and 1000 MA. The tendency of the Bitcoin price to revert to the 200 MA and to stray in and out of its +/-10% range envelope has given another bearish signal – not confirmed at present but raising a red flag nonetheless.
Traders and investors should practice caution right now. There may be much lower lows on the cards. The caveat is that price may correct back up to $590 before resuming the downtrend. The bullish view is similarly clouded by the fact that A-B-C (correction) and 1-2-3 (advance) are often indistinguishable in the Bitcoin chart.
Be ready to buy at levels below $440 and be ready to sell at $590. For shorter term trades, use the 200 MA +/-10% envelope lines as dynamic support and resistance but don’t let the market catch you unaware – use these lines for stop loss orders too. As always, keep in mind the risk of price spikes near market lows, as can be seen in the BitFinex and BTC-e charts.

Daily updates to follow Monday through Friday.
Ongoing discussion in the CCN Traders group. View our Bitcoin Price Chart here.
Disclaimer
The writer is fully invested in Bitcoin via BTC-e and Bitfinex. Trade and Investment is risky but not as risky as some other things out there. Take care only to take action in the market when you are 100% sure of the outcome. CCN accepts no liability whatsoever for losses incurred as a result of anything written in this Bitcoin price analysis report.

A Solution for Trustless Bitcoin Microtransactions Is Here

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micropayment channels shows how Bitcoin can be used for transactions in amounts as small as a fraction of a penny. In fact, micropayment channels can make microtransactions denominated in satoshis much more practical in the real world. Right now, it costs roughly $0.04 to broadcast a transaction on the Bitcoin network. While this is much cheaper than other payment networks, sending one satoshi becomes rather impractical. In a recent video released by software engineer James Poole, the demonstration of

With a micropayments channel, a Bitcoin user can setup a trustless environment with a server that allows them to send multiple payments without broadcasting each transaction on the Bitcoin network. This leads to much lower transaction fees overall, and it also makes nanotransactions a practical means of payment. Payment channels are not necessarily a new idea. In fact, the concept was implemented in bitcoinj last summer.

Bitcoin Microtransactions’ Advantages Over Current Solutions

Although there are already a few methods for handling nanotransactions right now, the currently available solutions use a centralized model. For example, a user of Coinbase can send bitcoins to other Coinbase users without a fee. The same concept applies to ChangeTip where you can tip someone as little as a single satoshi over the Internet. The main problem with these services is that they don’t follow the same decentralized principles found in Bitcoin. In fact, they are more like traditional payment options, such as PayPal or banking institutions, than Bitcoin itself. Micropayment channels solve this issue by creating a trustless environment where the client and server create a mutli-sig agreement rather than giving the server complete control over the user’s account balance.

Real World Applications

So where would people actually use this kind of micropayment channel?

• Tipping wallets – The most obvious place where this kind of solution for micropayments is needed right now is in tipping wallets. While tipping services, such as ChangeTip, are already pretty awesome, they still have the problem of being liable for your entire account balance. If ChangeTip used a micropayments channel server, the account balances could not be stolen by a hacker or rogue employee at the company. Bitcoin is about removing as much trust as possible from third parties, so it would make sense for any online Bitcoin wallet to implement this security upgrade.
• “Pay as you go” Wi-Fi – This is the usual example given for the power of micropayments. Instead of purchasing a day pass or monthly plan for Wi-Fi access at an airport or cafe, it could make sense for some people to make micropayments to the entity providing Wi-Fi access. Perhaps a user could have 5 satoshis automatically sent to the Wi-Fi provider every time they download a KB of data. You can watch Vitalik Buterin discuss this concept in the video below.
• “Pay as you go” web hosting – Web hosting services could also benefit from the “pay as you go” model. Instead of charging a flat, monthly fee, website owners could make micropayments to a hosting provider every time someone visits their website. This option becomes even more interesting as a possible payment model for decentralized web hosts, such as grids on the Bitcloud network.
• Content distribution – Imagine making micropayments to Netflix for each second of a TV show or movie you watch on their platform.

Still Room for Improvements

I reached out to James Poole on Twitter after seeing his demo video, and he talked about building a platform, MicroTrx, for various applications to use as a micropayment gateway. Poole noted, “My end goal is to build a micropayment gateway to allow any third party to integrate [trustless microtransactions] and also provide tools for anyone [who needs assistance].”

On the topic of removing trust from the equation entirely, I pointed out that centralized entities still had to be trusted to eventually deliver the bitcoins to the correct party. Poole pointed out that it’s not just the centralized servers that you have to trust to deliver the microtransactions. Poole agreed, and he explained, “They are open to many attack vectors: MtGox style, hackers rerouting payments, employee theft, loss of coins, etc.”

Having said that, this is still a move in the right direction when it comes to removing trust from micropayment servers. Perhaps we’ll have to wait for Monetas or a decentralized micropayments application built on top of Bitcloud to enjoy the “Holy Grail” solution, but this option can definitely help us with sending tiny amounts of bitcoin across the globe right now.

Why Bitcoin Value vs. The Dollar Doesn’t Matter (and Never Will)

Today I will extend to you three key reasons why the Bitcoin value versus the “Almighty Dollar” is of little significance, and may be totally irrelevant both now, and in the future.

One reason can be from distilled from lessons learned in our history of decentralized networks versus other centralized networks. One can be realized through the present day landscape, and one looks into the future of money as we know it. So let’s begin with our ability to learn from history.

Twenty years ago, when the Internet was just starting to gain momentum, it was in a similar state of development as Bitcoin is in today. “The Web” was replacing ancient communication methods like typewriters and snail mail at a slow, but steadily increasing rate. These  wouldn’t be instantly replaced, but would be one day irrelevant. As we moved along a few more years, and the 21st century dawned upon us, mainstream news magnets like CNN and the Washington Post joined “The Online Revolution.” This caused newspapers to shrink in size, number and demand. As The Internet grew in scope, was it ever compared directly, on a daily basis, to the New York Times or Time Magazine in its relevance?

Just as people today are asking “What is Bitcoin?,” people in 1994 were asking “What is e-Mail?,” and “What is The Internet?” Bitcoin is following the Internet’s lead, in essence, building its own blockchain technology on top of the Internet’s existing virtual blockchain, if you will. Bitcoin’s growing influence on monetary systems and global commerce are set to be similar in depth to the Internet’s inherent ability to change the way we all communicate worldwide. Bitcoin is not so much reinventing the wheel, although it may in the currency markets as it is setting the established wheel of the Internet in an exciting new direction. This potential will take another few years to realize fully how far Bitcoin value can go, but it is moving upward and onward, and the world is starting to take notice.

Bitcoin and Bitcoin value have scared some sovereign governments to the point that they have banned it outright, in practice, or through de facto capital controls. China attacking banks and account holders helped crash the BTC market at the beginning of this year. It has gone through the Mt.Gox fiasco, where trading bots were alleged to pump up the price of BTC, amounting to a market bubble. Also factor in Silk Road, the New York State Licensing controversy, and Alibaba’s IPO, the Bitcoin value is still up over 200% in USD value from this time last year. That Bitcoin value has not only survived on a global basis for more than five years, but thrived, and attracted some of the largest merchants worldwide (PayPal, Dell Computers, Dish Network, etc.). This is much more relevant than any comparison to a currency that is in it’s final years of relevance itself. If that doesn’t prove the inherent strength of Bitcoin value, nothing will. What else has gained 200% or more in these market conditions?

Bitcoin Market Values, Feb_2014

Comparing Bitcoin value to the dollar’s is like comparing a written letter to an email.

They may both transmit information or value, but that’s where the comparisons should end. Today, merely out of desperation, Bitcoin value is compared to the World’s Reserve Currency, the most liquid, most distributed, and most established currency of all time, the U.S. Dollar. We compare Bitcoin value to the dollar’s because they’re both seen as currencies, but Bitcoin value is much more than that. Currency is just Bitcoin’s first “app.” It appreciates in the range of 2-400% per annum, and that’s in the “off year” like this one. You can send 1000 bits of information within a Bitcoin. You can send millionths of a Bitcoin to someone as payment. The amount of Bitcoins produced is market capped. The distribution of Bitcoin is fully decentralized and is not bound by any primitive territories.

The U.S. Dollar continues it’s path to its true inherent value

“The Almighty U.S. Dollar”, on the other hand, is kind of like Jack Nicholson, Bill Clinton, the late Joan Rivers, or any other superstar from generations gone by. They’ve had their time in the sun, where they once ruled their market domain, and now they are fading into our history. The dollar’s value is found at this point solely in its liquidity, it’s history, and the ability of the U.S. to coerce smaller countries to use it at the business end of a gun. Just ask Muammar Gaddafi.

The U.S. Dollar is poised for a collapse of epic proportions, according to many experts. The “Great Recession” of 2008-2009 was just foreplay. A currency’s “Global Reserve Currency” status lasts anywhere from 65-70 years, on average, and the U.S. Dollar has been “in office” for over 70 years now. The sphere of influence of the U.S. Military worldwide, with well over 100 nations occupied by military bases, is the main thing keeping the dollar in business right now. But times are changing.

The BRICS Development Bank is a major regulatory step in advancing the demise of the dollar as an internationally relevant currency. BRICS nations (Brazil, Russia, India, China & South Africa) control 40% of the world’s currency reserves and population. When they basically spit in the face of the U.S. Dollar in July, and said they would work directly with each other, and without the current Global Reserve Currency, the U.S. was strangely silent. These countries have been dealing in “Bilateral trade agreements” (International trade deals without exchanging their currency for US Dollars) for many years now. So this new world bank of commerce was just the next logical step.

They did this because the dollar is of little intrinsic value, and the Fed can’t seem to stop the bleeding. Federal Reserve officials have failed to get interest rates off of the pavement out of fear of collapsing the economy. They’re on the monetary version of life support. The U.S. Government can doctor the numbers, and change the metrics, but countries worldwide are turning their back on the depreciating asset known as the US Dollar, and they know it. Their main job is to make sure you don’t know it. You know what they say – ignorance is bliss.  And that’s also why the mainstream media only reports Bitcoin value drops, not the usual rise in Bitcoin value.

Many financial experts like Peter Schiff, Jeff Berwick, Mike Maloney, Ron Paul, and Robert Kiyosaki (see links for more information) are predicting the mother of all economic collapses when the dollar inevitably falls. In my former dealings on Wall Street myself as an investment banker, I have to concur.  Even legendary super-investor George Soros says the dollar died in 2008. Americans in particular are truly ignorant about economic collapses because they have never experienced one first hand. What happened in 2008 was a small heart attack, that is a prelude to your coming demise, if you don’t amend your ways. Has the U.S. done that, I ask you? Enough said. It’s only a matter of time.

“Eventually, this [dollar] will go to it’s true worth. Zero. So all of you savers [of dollars] out there, you’re going to lose big time!” – Robert Kiyosaki, author of Rich Dad Poor Dad

Does this mean we won’t use a dollar in the U.S.? No. We still use typewriters and snail mail. We still read newspapers.

Over 95% of these are moved digitally worldwide, not physically. So why not use a better digital currency instead?

Sort of. Not really. But when, not if, the dollar eventually collapses, and heads to it’s true intrinsic value, Bitcoin value will have an inverse market relationship. It will then skyrocket to unimaginable heights, at least against “The Dying Dollar.” As the dollar continues to slip and slide, Bitcoin will continue its march into the future. The way I see it, the only thing that can stop Bitcoin from outlasting the dollar on the global stage is if Bitcoin defeats itself. Governments attacking Bitcoin out of fear of it’s abilities will only cause the “Streisand Effect” to be enabled in their populace.

So the Bitcoin value versus the dollar right now is irrelevant, since Bitcoin is not going to replace the “World’s reserve currency” regardless. Ask Bitcoin industry leaders like Andreas Antonopoulos and Cameron Winklevoss, and they’ll tell you the price doesn’t matter. As Andreas once said on a Joe Rogan Podcast, the Internet’s value is not measured in its ability to replace a number of fax machines. So why measure Bitcoin in dollars? They are totally different ecosystems. Like comparing apples to oranges, literally.

Bitcoin has more than held it’s own in the face of great adversity over the last five years. Will the dollar, at the ripe old age of 70 years running in it’s global position, stand up through the next five years? With the international community turning on it, the Fed overproducing it, and Bitcoin beating it through attrition and superior technology? Don’t bet on it. The chances of the dollar going to zero in value in five years are at least even versus Bitcoin value doing the same. You may end up betting your bottom dollar on it, sooner than you think.

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Women are oftentimes so difficult to decipher, but Coinmama's definitely not all about keeping you guessing. She's boasting a fresh new design with her most streamlined layout to date. Her friendly new interface means it's faster and easier than ever before to buy Bitcoins within minutes- and always at the most competitive prices.

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It might be digital currency, but Bitcoins are still money -your money. Coinmama knows this, and because of that, she's added some additional features which makes using her a worry-free pleasure. She's introducing a new point-based verification with multiple verification methods. Along with this, she's adopted brand-new payment methods for credit cards, Google checkout and even accepting international bank wire deposits.

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Coinmama's got some new tricks for you. These come in the form of a real-time price calculator, which allows you to choose exactly how many Bitcoins to buy, as well as a new and completely transparent affiliate system which allows you to keep track of all your referrals. Coinmama is even learning new languages to make things a little easier for you non-English speaking Bitcoin lovers!

Coinmama Countdown

Don't worry, she's not playing hard to get- Coinmama is nearly ready to come back in full power. Stay tuned for an exact date for her return, but in the meantime, we're back with our old site with a few of the new features.

'like' her on Facebook to keep her sweet (and get filled in with other news and updates).

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PayPal: Bitcoin Partnerships Will Help Us Study Consumer Behavior

Though long rumored, the news that PayPal had formally aligned its business with bitcoin dominated headlines this week due to the company’s size, brand recognition and influence as an early pioneer and dominant player in online payments.

For PayPal, the move comes at a time of increased competition in the web and mobile payments space, with tech giant Apple most recently entering the sector with Apple Pay.

As such, there has been much speculation as to how bitcoin could play an increasing role in helping PayPal continue its market dominance while helping ease the still prevalent friction in online payments.

Speaking to CoinDesk, PayPal senior director of corporate strategy Scott Ellison elaborated further on the nature of his company’s latest move, but cautioned that, as of now, PayPal plans to tread lightly in the bitcoin space.

Ellison told CoinDesk that PayPal’s initial role in its partnership with major bitcoin processors will be to function as an observer, explaining:

“[We’re looking] to gain insight into the types of consumers using bitcoin and will work with businesses to understand what types of content they are selling more of.”

To start, PayPal will analyze bitcoin buyer behaviour soley on its PayPal Payments Hub, an all-in-one online e-commerce platform that allows businesses to integrate multiple payment options – including bitcoin, credit cards and mobile carrier billing – with ease.

Merchants who use the platform will now be able to implement the existing bitcoin and altcoin processing services provided by BitPay, Coinbase and GoCoin, companies that Ellison called “the three leading bitcoin payment processors”.

Starting small

While PayPal did not integrate bitcoin into its digital wallet or proprietary payment processing services, Ellison framed this as consistent with PayPal’s approach to helping instill new behaviours in its online userbase.

When trying out new technologies, Ellison said, it’s common for consumers to start small as they look to test the waters with new buying methods.

Ellison told CoinDesk:

“Smaller, digital purchases are what consumers might like to try with this new payment method just as they did with then-new mobile operator billing for digital goods like games and ringtones on mobile devices.”

Ellison also suggested that the platform’s digital goods merchants may have the most compelling reasons to adopt bitcoin today, citing the digital currency’s potential to increase sales and reduce costs for this business segment.

Integration timeline

Ellison further confirmed the statements of BitPay, Coinbase and GoCoin, saying that PayPal has been working on integrating bitcoin into the PayPal Payments Hub for four months.

Though others like Overstock have implemented bitcoin processing services in as little as one week’s time, Ellison said that a longer timeline is consistent for this type of company procedure.

“This is a typical, normal integration timeframe, as we had to ensure we had customer service and partner support ready,” Ellison said.

However, he said PayPal has been interested in developments in the bitcoin space since 2012, due to the digital currency’s potential to reduce friction and cost in the payments space for both businesses and consumers.

Observing developments

Ellison framed PayPal’s overall move as consistent with its standard policies of embracing innovation but doing so in ways that ensure the services on its platform are safe and reliable.

He said:

“We’re proceeding gradually, supporting bitcoin in some ways today and holding off on other ways until we see how things develop.”

Going forward, Ellison indicated that PayPal is hoping to inform more of its merchants about their ability to now accept bitcoin, reaching out through the media and normal communications channels.

UK Bows To Pressure, Likely To Reverse Course On Taxation Of Bitcoin: Will The US Be Next?

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As the Internal Revenue Service and Congress remain mostly quiet on how to treat Bitcoin for tax purposes, tax authorities in the UK are about “to do an about turn on the taxation of Bitcoin.” The news comes from Richard Asquith, Head of Tax, TMF Group, who added that the new rules “will give a lot of clarity” to the taxation of Bitcoin and virtual currencies in the UK – a far cry from what we have right now in the US.

Under the proposed new rules, UK tax authorities, known as Her Majesty’s Revenue and Customs (HMRC), will change its classification of Bitcoin and other virtual currency from a tradable voucher to private currency. Those changes closely mirror similar tax guidance issued recently in Singapore, a move that Asquith pointed out when he alerted me to the changes.

For British tax and investment purposes, vouchers have a monetary face value. If you sell vouchers at or below their monetary value, no value added tax (VAT) is due. Depending, however, on the redemption value, the transaction is subject to VAT on all or part of the value. When it comes to Bitcoin, if it’s treated as a face-value voucher to buy goods and services, it would be subject to full VAT on the value of the Bitcoin sold. Under this tax treatment, about 20% VAT would be charged each time Bitcoins were used. That level and scale of taxation was said to be killing off the Bitcoin market in the UK.

Investors, merchants, consumers and lobbyists alike balked at the old treatment. For some time, they put pressure on UK tax authorities to make a change. It appears that HMRC will now reverse positions and treat Bitcoin as though it is private money. On the trading side, that means that VAT would be payable on commission charged on exchanges. And while the details are still not hammered down on the consumer/trader side, indications are that HMRC would also make Bitcoin subject to the capital gains tax (CGT) but allow an exemption for those who hold onto them for more than a year (the equivalent of an extremely, extremely favorable long term capital gains rate). Other taxes would likely not apply.

You might recall that this is similar to a position adopted last year by Germany. Only a handful of countries have actually taken a clear position on the matter, prompting Asquith to comment, “If the UK tax re-categorisation goes ahead, it will stabilise the domestic Bitcoin exchange market which had been threatening to move out. It would also probably start attracting European and even global trade to migrate to the UK as it will be one of the first countries to have a well thought through tax regime.”

The US cannot claim a similar position – even as the popularity of Bitcoin increases. Last week, online retailer Overstock made news when it announced that it would accept Bitcoin as payment. It is the largest US company to date to tout acceptance of Bitcoin – but it’s far from the only company trying out the virtual currency. Smaller retailers are signing on, too.

Jennifer Longson was an early adopter when it came to accepting Bitcoin at her business. Her store, Cups and Cakes Bakery, with an actual physical presence in San Francisco, has accepted Bitcoin for payment since October 2012. It’s a easy process, just a click over to the payment page where payments are accepted via Bitcoin for your order for the usual suspects (red velvet, chocolate, and vanilla cupcakes) or whatever happens to be on the cupcake calendar for the month.

And despite the fact that Longson doesn’t have the retail volume of an Overstock.com, she says, about the decision to accept Bitcoin, that there “were lots of up sides with no down sides.” Customer response, she says, has been very favorable. “We’ve even inspired other businesses to take the plunge!”

And therein is exactly the problem with the failure of the US to take a position on taxing virtual currency: as more and more retailers jump on the Bitcoin bandwagon, it’s likely that we’ll end up with a serious compliance problem. In contrast, proactive, thoughtful tax policy will likely give countries like the UK and Singapore a real advantage over countries without any real guidance.

Asquith and others across the pond seem to believe that the US will eventually adopt some kind of policy statement on the taxation of Bitcoin. To stay competitive in a global market, they’ll have to.

Of course, all of these moves to figure out how to treat Bitcoin mean that we’re doing exactly what Bitcoin didn’t think it wanted in the first place: we’re labeling it. We’re categorizing it. We’re very nearly (gasp) regulating it.

As Asquith notes, this puts Bitcoin in the unusual position of moving “away from its original aspiration to be a global, unregulated currency.” Without some sort of regulation on the tax side, however, Bitcoin could find itself the victim of its own success. I guess they’ll have to figure out how to have their, er, cupcake and eat it, too.
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IRS Says Bitcoin, Other Convertible Virtual Currency To Be Taxed Like Stock

More than five years after Bitcoin made its debut, the Internal Revenue Service has finally issued guidance to taxpayers on how to treat it – and other virtual currency – for federal income tax purposes. Their decision? It’s not money. Noting that “virtual currency is not treated as currency that could generate foreign currency gain or loss for US federal tax purposes,” the IRS determined that Bitcoin and similar currencies are to be treated as a capital asset.
The decision to treat Bitcoin and other virtual currency as a capital asset means that capital gains rules apply to any gains or losses. That treatment does have an upside for taxpayers since capital gains rates are generally pretty favorable to taxpayers. This year, for example, capital gains rates for long term gains (those held more than a year) range from 0% to 20%. And losses are really losses: capital losses can be netted against capital gains and the excess losses can be deducted from ordinary income (up $3,000 each year).
For those buying and selling Bitcoin as an investment, calculating gains and losses are figured the same as buying and selling stock. The basis, the holding period and even the triggering event (the sale of the asset) are all very clear.

Bitcoin Wallpaper (2560×1600) (Photo credit: PerfectHue)

For those treating Bitcoin like cash – from paying for services to buying cupcakes in San Francisco to shopping for patio furniture on Overstock.com – transactions may result in a gain or a loss. And while the triggering event (the transaction) is easily determined, it may be difficult to figure cost basis – or the holding period.
If, however, Bitcoin had been treated as currency then ordinary income would have applied to any gains or losses as a result of fluctuating values. In addition, the net income investment tax (NIIT) might have applied to taxpayers at the top pushing the rate as high as 43.4% (39.6% + 3.8%).
Other countries had already bowed to pressure to clarify the tax treatment of Bitcoin – including, most recently, the UK. Before that, Singapore had announced plans to treat Bitcoin like a product subject to its goods and services tax (neither currency nor pure capital gains) while Germany considered Bitcoin as “personal money.”
The IRS continued to remain silent on the issue even as Bitcoin hit record highs in value. Some investors and taxpayers took matters into their own hands – among them, the Winklevoss twins (yes, the ones from Facebook) who made up their own rules when they filed with the Securities and Exchange Commission for their Winklevoss Bitcoin Trust. At the time, they suggested that “[u]nder one reasonable approach, a Bitcoin should be treated as a capital asset (and not as “currency”).” Prescient? Good guesses? Or excellent advisors? No matter how they arrived at the answer, that treatment ensures that the Winklevoss twins won’t have to amend past returns: today’s guidance takes effect immediately and covers past years. Penalty relief may be available for those taxpayers who took other positions “due to reasonable cause.”
The IRS has also made it clear that normal reporting rules as they relate to bartering, independent contractors and self-employment tax still apply whether you’re paid in virtual currency or cash.
Finally, the guidance issued today only applies to “convertible” virtual currency. “Convertible” virtual currency is generally defined as virtual currency that has an equivalent value in real currency or acts like a substitute for real currency (guidance from FinCEN downloads as a pdf).
If, after all of that, you’re trying to do the math in your head, Bitcoin (BTC) was valued on March 25, 2014, the date of the IRS Notice at $578.62; in contrast, at the beginning of December 2013, Bitcoin was valued at $1,200. It will be interesting to see how today’s guidance affects future Bitcoin valuations. While the US doesn’t drive the Bitcoin market, concerns about how the tax treatment might slow down Bitcoin as a viable currency for ordinary transactions in the US are sure to affect trading.
You can read the entire IRS Notice 2014-21, issued today, here (downloads as a pdf).
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How I Paid My Bitcoin Taxes

Tax day is usually not very complicated for me. I’ve used an accountant for years and simply meet with him annually to make my financial confession. It typically takes an hour. This year, though, was a bit different. We had to talk Bitcoin.

On March 25, I sent my accountant a link to the new IRS guidance on Bitcoin. With the price of Bitcoin soaring from $13 to $1,100 in 2013, people who got in low and sold high made real money off of it, and the government wants in on the proceeds, with the IRS declaring just weeks before the dreaded April 15th deadline that virtual currencies be treated like stocks. I let my accountant know it was going to make my taxes more “interesting” this year. Almost exactly a year prior, I had bought 7 Bitcoin for just under $900 and then spent a week living on them. I made the address of my Bitcoin wallet public. I spent almost 5 Bitcoin on food, shelter, a bike rental and a surprise crash diet. Over the course of the week, I (awkwardly) received over $1,000 (or approximately 15 Bitcoin) from 86 strangers who were excited about my experiment. That was an ethical quandary for me, and I took care of it by blowing it on a dinner for a bunch of Bitcoin enthusiasts (a.k.a. randos rounded up from Reddit’s Bitcoin page) at a BTC-accepting sushi restaurant. That was the most “interesting” situation come tax-time.

The IRS guidance isn’t actually that complicated, but the record-keeping it makes necessary is. You have to keep track of how expensive your Bitcoin is when acquired — whether you bought it or “mined” it by making your computer a slave to the Bitcoin network — and then declare capital gains or losses based on the increase or decrease of its value when cashed in or spent. Luckily for me, I used Coinbase and Blockchain for my Bitcoin spending, not Mt. Gox. The Tokyo-based exchange MtGox imploded this year, “and no one has been able to access their trade history,” laments Bitcointaxes.info, advising people “to file an extension and hope that MtGox gives access to their historical records before October 2014.” Even if Coinbase and Blockchain went the way of Gox, I had made a detailed expense report that included what I spent on Bitcoin that week and its value when I spent it. And I’m glad I did, because Coinbase doesn’t track Bitcoin’s value at the time it’s transferred (though Blockchain does).

Bitcoin taxation: Clarity and mystery

More and more clients own or use virtual currency. Here are the possible tax consequences practitioners need to know.

  by Annette Nellen, Esq., CPA
Bitcoin, a virtual currency created in 2009, has garnered a lot of attention from the government, investors, entrepreneurs, the media, and others. Consider the following:

• Regulation: In 2013, the Financial Crimes Enforcement Network (FinCEN) of the Treasury Department issued guidance on what types of virtual currency activities required registration and reporting as “money services businesses” under the Bank Secrecy Act regulations (FIN-2013-G001).
• Entrepreneurship: A New York Times article, “Why Bitcoin Matters,” (Jan. 21, 2014) by Marc Andreessen, included an editor’s note that Mr. Andreessen’s venture capital firm had almost $50 million invested in startups involved with bitcoin. Bitcoin 2014, an annual conference, attracted over 1,000 attendees from more than 50 countries. In April 2014, the House Committee on Small Business held a hearing on the benefits and risks of bitcoin.
• Growth: The National Taxpayer Advocate’s 2013 Report to Congress labeled the need for guidance on virtual currency as one of the “most serious” tax problems (pp. 249–255). The report notes that from July to December 2013, bitcoin usage increased from 1,700 transactions per hour to over 3,000, while over 10,000 businesses accept bitcoin. These figures continue to increase. Also, some charities accept donations in bitcoin. In February 2014, the Federal Election Commission approved political committees’ accepting bitcoin contributions (AO 2014-02).

After urging from the Government Accountability Office (GAO-13-516 (4/15/13)) and the National Taxpayer Advocate, in March 2014, the IRS issued basic guidance on the tax consequences stemming from the use of the virtual currency and requested comments on additional areas to address.
This article provides a brief overview of virtual currency, why people want to use it, the recent IRS guidance, outstanding tax issues, and practical considerations for tax practitioners.
Virtual currency defined
A virtual currency might also be referred to as crypto-currency, virtual money, or digital currency. FinCEN defines virtual currency as a “medium of exchange” that is not considered legal tender in any jurisdiction. Typically, a virtual currency is “convertible,” meaning it has an “equivalent value in real currency, or acts as a substitute for real currency.” FinCEN describes two types of virtual currencies: centralized and decentralized. A decentralized currency, such as bitcoin, has no central repository or single administrator (testimony of FinCEN Director Jennifer Shasky Calvery before the Senate Committee on Banking, Housing, and Urban Affairs (11/19/13)). The IRS describes a virtual currency as “a digital representation of value” (see Notice 2014-21).
Bitcoin is a decentralized virtual currency based on cryptography for identifying and verifying transactions. This system enables bitcoin to operate as a medium of exchange without a third-party intermediary to verify that the virtual currency is valid (this process instead involves the “blockchain,” a type of public ledger). For the technical details of bitcoin, see resources linked to at the author’s “Virtual Currencies and Taxation” webpage.
Although bitcoin is by far the most well-known virtual currency, other virtual currencies include litecoin, peercoin, and dogecoin.
Why people use virtual currencies
Using a virtual currency can involve lower transaction costs than using a credit card. Transfers are faster than processing payments by check or credit card. Personal information (other than information a vendor might otherwise collect from a customer) is not transferred along with the virtual currency payment, which can reduce the risk of identity theft.
Vendors might prefer a virtual currency over credit cards because a customer can later improperly tell the credit card company that the charge is incorrect and have it reversed (a “chargeback”). A customer cannot do that with a virtual currency since a decentralized virtual currency is like using cash.
A virtual currency is easy to use as a universal currency globally because users don’t need to convert their currency to that of the vendor’s jurisdiction to complete a transaction. In addition, a virtual currency is cost-effective for payments of less than a dollar.
IRS guidance
Under Notice 2014-21, convertible virtual currency (such as bitcoin) is treated as property for tax purposes (rather than as a foreign currency). The following topics are addressed in the 16 Q&As in the notice:

• If a person receives virtual currency for rendering services or selling goods, the amount is included in gross income at fair market value (FMV). 
• As with other forms of payment, Forms W-2, Wage and Tax Statement, and 1099 might be required.
• FMV is determined as of the date of payment or receipt of the virtual currency. If the virtual currency is listed on an exchange where the exchange rate is determined by market supply and demand, the exchange rate can be used “in a reasonable manner that is consistently applied” (Q&A-5).
• When a virtual currency is used to purchase goods and services, there will be a gain or loss to the user based on the basis of the virtual currency compared with its FMV when used. The character of the loss and whether a loss is allowable are determined by the usual rules (Sec. 1221 and Sec. 165).
• A person who “mines” a virtual currency must include the FMV of the virtual currency in income on the date of receipt. (Mining is the process of obtaining bitcoins by using a computer to solve complex mathematical problems.) If mining is an individual’s trade or business, the net earnings are subject to self-employment tax.
• A person who “contracts with a substantial number of unrelated merchants to settle payments between the merchants and their customers is a third party settlement organization (TPSO)” and may be required to issue a Form 1099-K, Payment Card and Third Party Network Transactions, to the merchant and IRS depending on the merchant’s volume of transactions (Q&A-15 and Sec. 6050W).

Open tax issues
The IRS is seeking comments on “the tax consequences of virtual currency not addressed in this notice that warrant consideration.” A sampling of those issues follows:

• Which exchange rate should be used if more than one is available? Is averaging allowed? This question seems mostly relevant for mining. For transactions denominated in dollars but paid in virtual currency, the value is already established, although the user may not have kept a record or received an invoice (such as for a cup of coffee).
• When bitcoin is used, it is confirmed (through algorithms and the blockchain). Thus, because a specific “coin” was used or received, it is appropriate to use specific identification to determine the basis of bitcoin used. The first-in, first-out (FIFO) inventory method to determine basis (Regs. Sec. 1.1012-1(c)) is used only for securities. To make it easier for some taxpayers to track a virtual currency’s basis, should they be allowed to use FIFO? Should FIFO be required where a taxpayer does not have sufficient documentation to specifically identify the virtual currency?
• Does a merchant using an exchanger to convert bitcoin to dollars have gain or loss to report on any difference in value between the bitcoin when received and when converted? Or does the gain or loss belong to the exchanger? The answer likely also depends on the particular facts of the arrangement between the merchant and exchanger.
• Does Sec. 6045, Returns of Brokers, apply to a person that exchanges a virtual currency for dollars?
• Is a virtual currency a “commodity” subject to mark-to-market accounting for dealers and traders under Secs. 475(e) and (f)? The Commodity Futures Trading Commission is considering whether it should regulate virtual currencies (see Reuters, “Watchdog Says Considering Bitcoin Regulation” (3/11/14)).
• Is a virtual currency a foreign financial asset under Sec. 6038D, possibly reportable on Form 8938, Statement of Specified Foreign Financial Assets?
• Should a “bitcoin wallet” be reported on FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR)?
• Is one virtual currency considered of like kind to another virtual currency for Sec. 1031 purposes? Is virtual currency considered of like kind to any other type of investment property? How does existing guidance on exchanges of coins and bullion apply to these questions? The chart at the bottom of this column provides brief descriptions of Sec. 1031 rulings involving coins and bullion.
• Can a de minimis rule be created? Sec. 988(e)(2) allows an exclusion of up to a $200 per transaction for foreign currency exchange rate gain if derived from a “personal transaction.” What about a de minimis rule where an individual can exclude virtual currency gains if at no time during the tax year he or she owns more than $x of the virtual currency? Such a rule would eliminate the need to track basis of the virtual currency for small transactions.

Practical considerations for tax practitioners
As virtual currencies continue to become more and more pervasive, CPAs will find clients—individuals, businesses, and not-for-profits—involved with bitcoin and other virtual currencies. Thus, it should be a standard question to ask all clients whether they mine, own, or use virtual currency. If they answer “yes,” details need to be obtained to determine the tax consequences. The client will very likely need assistance with recordkeeping to allow for proper tax reporting. The practitioner should also learn more about the technical aspects of the virtual currency to better understand the tax consequences. If the client’s virtual currency activity appears to be a business, practitioners may want to ask if the client has reviewed FinCEN rules and state law about any required registrations or consulted with an attorney.
Practitioners should be alert to clients who think use of virtual currency is a way to avoid taxes. While anonymity is an aspect of using virtual currency, there can still be trails through normal business practices and any public ledger that exists for verifying the virtual currency. And, of course, taxpayers must comply with tax laws regardless of the government’s ability to find out about a transaction.
With the IRS’s call for comments, hopefully more guidance will be issued to help practitioners with the myriad issues clients are likely to have as ownership and use of virtual currency grows.
Additional reading
For additional information on virtual currency, see links at the author’s “Virtual Currencies and Taxation” webpage.

Sec. 1031 rulings involving coins and bullion

Ruling	Item 1	Item 2	Like kind?	Rationale
Rev. Rul. 76-214	Mexican 50 peso gold coins	Austrian 100 corona gold coins	Yes	Both coins are bullion-type, with value measured by their gold content. Neither is considered currency in the issuing country. When they are not circulating currencies, the differences “are primarily of size, shape, and amount of gold content.” Thus, the nature or character of the coins is the same.
Rev. Rul. 79-143 (see also GCM 37811 (1/5/79))	$20 gold numismatic-type coins	South African Krugerrand bullion-type gold coins	No	Although both are gold, the underlying investments are different (bullion-type coins vs. numismatic-type coins). In the GCM, the IRS states that the numismatic coins may be valued for their condition, age, or beauty, in addition to their gold content. In contrast, bullion coins are valued based on the price of gold.
Rev. Rul. 82-96	Gold bullion	Canadian Maple Leaf gold coins	Yes	While the Canadian coin was legal tender in Canada to its face value of $50, it was not being used that way because the gold value was greater than $50. Thus, both coins were viewed as bullion-type coins with similar nature and character.
Rev. Rul. 82-166 (see also GCM 38899 (9/27/82))	Gold bullion held for investment	Silver bullion held for investment	No	Gold and silver are different metals, used in different ways (gold for investment; silver as an industrial commodity). In the GCM, the IRS stated that a taxpayer who exchanges gold bullion for silver bullion “is not in essentially the same economic situation after the exchange as he or she was in before the exchange.” The IRS also noted that gold and silver as commodities were subject to different market forces.
California Federal Life Ins. Co., 76 T.C. 107 (1981), aff’d, 680 F.2d 85 (9th Cir. 1982)	Swiss francs	U.S. Double Eagle gold coins	No	The gold coins are of numismatic value, “valued primarily for their rarity, as collector items.” Swiss francs represent a circulating currency. Thus, the items are not of the same nature or character.