Bitcoins are not currency, according to the IRS

According to the IRS, as reported yesterday, bitcoins are property, not currency.  This announcement does not seem to be dissuading “investors” who continue to funnel cash into bitcoins and bitcoin-related companies.  Just today, Circle Internet Financial raised $17 million to develop systems to make bitcoins and other virtual currencies easier to use.  These people just don’t get it – bitcoins, or any other virtual/alternate currency, will never be acceptable to the IRS or the U.S. government, and probably will not be acceptable to any other government.  The reasons are many (see  Despite Virtual Hype, Bitcoins Are a Complete Farce), but with regard to the IRS it is very simple – the IRS is never going to allow companies or individuals to conduct business in an alternate currency, unless they are assured that they can collect the taxes due.  The IRS is not going to spend billions of dollars to train agents to conduct audits in different currencies and they are certainly not going to simply trust that companies and individuals are properly reporting.  Once the U.S. officially rejects bitcoins, most if not all other governments will follow suit and bitcoins will be dead.

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