The FEC recently issued an opinion that opened the door for candidates and committees to begin accepting bitcoin. An article by CoinDesk.com highlights a few of the candidates who have begun accepting the alternative currency. One such candidate is Steve Stockman, who last month introduced legislation to overturn the IRS decision that bitcoin is property. Stockman’s bill, the “Virtual Currency Tax Reform Act,” would define “Virtual currency” as “a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value.” The bill also states, “The Internal Revenue Service shall treat virtual currencies as a foreign currency for Federal tax purposes,” and impose a 5 year moratorium in which the federal government would not be allowed to “impose, assess, collect, or attempt to collect capital gains tax on virtual currencies.”
The key words in that moratorium are “capital gains tax.” The bill would not make bitcoin and other crypto-currencies tax exempt, it would simply change the regulatory definition from “property” to “currency.” This would then put the IRS regulation in-line with the FinCEN definition that crypto-currency is currency. The FinCEN regulations require a “money transmitters license” in order to operate a business “that provides money transmission services. The term ‘money transmission services’ means the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means.”
I realize that a sizable percentage of bitcoin users will not comply with any regulations placed on it. While I am in no way supportive of any government regulation of bitcoin, there are people and businesses currently accepting bitcoin that will comply with the regulations, and they need as much support as possible from the people who aren’t complying. If whatever regulations come about place too much burden on the businesses, they will stop accepting bitcoin.
A locally-owned store in Keene, NH (that currently accepts bitcoin) was approached about having a Bitcoin ATM, and after looking into the regulations, decided it was too much hassle to get the needed license to have the machine in the store. If the burdens for just accepting bitcoin become too high, this store may stop accepting bitcoin. I know, the hardliners approach is, “they can put any regulation they want, I’ll just ignore it.” But not everyone will, and if bitcoin (or crypto-currency, in general) is to thrive, we must work together, and try to have as little regulation as possible.