In late March, the US Internal Revenue Service issued Notice 21-2014, which classified Bitcoin and other such “virtual currencies” as property for tax purposes.
On Wednesday, the editorial board at The Detroit News argued against this stance, suggesting instead that Bitcoin be classified as a foreign currency:
The IRS treats Bitcoin transactions as property, which means every penny gained in a transaction technically should be reported as income. But since the value of bitcoins changes every second, compliance with antiquated IRS rules is virtually impossible.
The IRS should reclassify bitcoin as a foreign currency, so that the change in value between when a currency is acquired and when it’s spent is a non-taxable event. Germany already considers Bitcoin a “unit of account” and encourages competition in money production.
Two things to note in this editorial besides the obvious.
First, the editorial board points to Germany as having a better way of dealing with cryptocurrencies. It’s always nice to see a mainstream publication not default to arguments based on American exceptionalism.
Second, the editorial actually makes the argument that Bitcoins are stable:
In many ways, bitcoins offer just as much stability as traditional U.S. currency. Because it’s run by software code, there is no chance Bitcoin can be debased like the dollar has consistently in recent history.
Bitcoin’s mathematically-based software slowly releases new amounts of money at a fixed rate. Once maximum circulation is reached, it will stop.
This is a useful data point on the barometer of public perception. If a mainstream newspaper is promoting a cryptocurrency’s stability against the debasement of a fiat currency, that’s noteworthy.
The full editorial can be found here. We welcome any and all thoughts on The Detroit News’ position.