The digital currency is about to be officially recognized by U.S. legislation. US Congressman Steve Stockman of Texas has announced his plans to introduce a new bill, the ‘Virtual Currency Tax Reform Act’, which would change the IRS’s treatment of the virtual currency.
At this time the Internal Revenue Service views bitcoin and other digital currencies as property, as those, who performs any trade operations with Bitcoins, like selling or purchasing them, are subject to a 15% capital gains tax. In case the bill is passed, the cryptocurrency will be treated not as property but as currency for federal tax purposes.
The bill explains that “the classification of virtual currencies as property means that users would be required to pay capital gains tax on any transaction using the virtual currency based on any gain over the virtual currency’s value from the time of purchase.”
In a brief statement, Stockman, who is considered to be a strong supporter of bitcoin, said that policies regarding bitcoin should be aimed at spurring innovation, rather than imposing restrictive levies.
“This is a nascent industry,” he claimed on Monday. “Along with 3-D printers and nanotubes, cryptocurrency is the future. We need to encourage it, not discourage it. There is risk associated with every budding industry in America.”
He also said he is introducing this bill “to build awareness and create a consensus in the Bitcoin community around government regulation of virtual currencies… I don’t think anyone really has a flavor of what they want and I want to start the Bitcoin conversations.”
Earlier this year Stockman even accepted the digital currency for a failed bid to unseat Senator John Cornyn, even though the Federal Election Commission had not formally approved using the virtual money for campaign contributions.
CoinDesk reports that when reached for comment, Stockman’s office said that more information regarding the bill is forthcoming, and that a public version has not yet been released. According to an official press release, Stockman is expected to comment on the bill during an 8th April meeting at the New York City Bitcoin Center.
Stockman’s legal proposal represents one of the first major efforts by Congress to regulate bitcoin usage in the country. In the past year, the digital currency regulation has become of great interest to Congress.
On March 25, 2014, the Internal Revenue Service issued guidance on how virtual currencies would be taxed and treated. The government agency ruled bitcoin to be treated as a property instead of a form of money.
The IRS stated that “under currently applicable law, virtual currency is not treated as currency that could generate foreign currency gain or loss for U.S. federal tax purposes.”
Thus, it requires capital gains on virtual currencies to be recorded and reported. However, the Bitcoin Foundation believed that this innovation could lead to unrealistic reporting, as currency also has been used by money launderers to hide evidence of deals for drugs and other illicit goods.
However, supporters believe that the technology behind Bitcoin has the potential to revolutionize the way people pay for things in an increasingly global world.