Lots of new developments in the bitcoin space hitting the news! Bitcoin continues, it would seem, almost on a daily basis to be achieving growing acceptance among merchants in a variety of industries. The other day, it was Overstock.com. Today its the National Basketball Association’s (“the NBA”) Sacramento Kings. The Wall Street Journal reports that the Kings are poised to begin accepting bitcoin “in return for its products, marking a symbolically important step in the virtual currency’s bid to achieve mainstream acceptance.” “Sacramento Kings to Accept Bitcoin,” http://online.wsj.com/news/articles/SB10001424052702304603704579323352532979922?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304603704579323352532979922.html
The move by the NBA franchise marks the team as the “…first major professional franchise to accept bitcoin…” Kings owner, Vivek Ranadive, understands the implications of his move, stating “…bitcoin had reached a tipping point where it had crossed from being a curiosity to becoming a legitimate form of doing commerce.” Ranadive, “gets it.” Others in the business world seem to be “getting it” with even greater frequency as days and weeks pass. My question is does the U.S. government get it, yet?
I’ll be the first to admit that I do not have a special relationship with Capitol Hill and therefore, my finger is not exactly on the pulse of Washington, DC, particularly since I live on the West Coast. However, following the “Bitcoin hearings” held in Washington late last year, when legislators and regulators listened attentively to virtual currency experts, I have read scant commentary on what might be under consideration, specifically, what may be in store as far as AML/BSA regulatory compliance in the virtual currency space is concerned.
My considered opinion is that only when legislation and regulations are promulgated, specifically directed towards the virtual currency space, will wholesale acceptance among broad swaths of the business community occur.
With that said, Singapore has grabbed the bull by the horns and has set forth some realistic guidance and regulation regarding the taxation of bitcoin in that country. “Indian Bitcoin Operators Resume Services With Caution” http://www.antimoneylaundering.us/news_det.php?id=4580 Instead of issuing unrealistic outright edicts banning banks from handling bitcoin transactions by third-party payment processors and exchanges (China), or issuing ill-conceived advisories highlighting the risks of Bitcoin (India), Singapore issued an advisory that, according to the article, states that businesses in the business of “buying and selling of the virtual currency will be subject to taxation on the gains made on the sale. However, if the Bitcoins form part of the business‘ investment portfolio, the tax authority considers the gains from any sale to be capital in nature and not subject to taxation.” Well, though I’m no tax attorney, this sounds like guidance to me. True, the guidance itself may raise more than a few more new questions. That’s ok, as an effort is being made to recognize the validity and reality of bitcoin. In other words, it is a beginning. Guidance and an overall regulatory blueprint is what must be formulated by governments if bitcoin and virtual currencies are to thrive.
Enter the Winkelvoss Twins. “Lawyer for Winkelvoss Twins‘ Bitcoin ETF Says SEC Review Going Smoothly.” http://blogs.wsj.com/moneybeat/2014/01/17/lawyer-for-winkelvoss-twins-bitcoin-etf-says-sec-review-going-smoothly/ Commenting on their efforts before the SEC to establish a exchange-traded fund and the need for some certainties built into the process, Evan Greebel, the attorney for the Twins states that “Ambiguity is the worst thing,” [quoting from the article] “…noting that it’s one of the factors that’s keeping institutional investors away and that’s making banks reluctant to provide accounts to businesses operating in the bitcoin industry. He said the Trust is making the case that bitcoin – often referred to as a digital currency – should be treated as a capital asset rather than, say, a currency or a commodity. That means bitcoin investments should be subject to capital gains taxes. Although some of the early enthusiasts for bitcoin might be put off by the arrival of a taxation regime, big institutions will welcome clarity on the taxation status for the new technology, Mr. Greebel said.”