Bitcoin has become hugely popular because its potential as a new type of currency that operates outside of any government control. Because it can be bought, sold, and traded anonymously online, outside of banking institutions, proponents say it can help make commerce fast and easy and empower people in third-world areas that have trouble getting access to capital. But skeptics say it can be used for money laundering and drug deals.
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Observers have been watching to see how the U.S. government ends up dealing with this phenomenon -- which could be a threat to its financial system. Last week, the IRS both legitimized it and diminutized it, declaring that bitcoin would be treated not like another currency (like yen, euros, etc) but like an asset (such as a stock).
On March 25th, the tax overlords released guidelines saying that the IRS will tax bitcoin as property, not as currency.More »