By Kay Filler, CPA, Principal
With plenty of buzz in the press from the second half of 2013 and continuing…the FBI shutting down Silk Road’s illicit website, young urban professionals making trades by meeting in retail establishments in Manhattan’s Lower East Side, and students and entrepreneurs buying coffee with them in Palo Alto…it appears the ranks of Bitcoin users and investors is ballooning.
Are Bitcoins (and other “digital” currencies) a commodity (investment) or a currency, or are they both? In the business environment, how should companies account for Bitcoin ownership, mining, trading and transacting activities in their financial statements? And when it comes to income tax compliance requirements, how should Bitcoin mining be reported and what type of account is the digital wallet holding Bitcoins? Could the wallet be subject to foreign account reporting requirements, since Bitcoin wallets do not reside within the U.S. banking system?
Clearly, developing and assessing the responses to these questions is evolving, and the accounting standards and tax regulations need focused efforts to respond to the reporting issues raised by this increasingly trendy economic force.
For more information on the questions and answers spawned by the Bitcoin craze see these blog posts: