Bitcoin Is Going Mainstream

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If you're thinking that bitcoin and digital currency generally are merely some one-off flash in the pan, the new Digital Currency Council would argue otherwise. The council launched in September and already had 400 members in early October—with an "overwhelming" response from accountants, said council CEO David Berger in an email. Guess what: digital currency is going mainstream.

And if that doesn't convince you, the IRS is helping to encourage attention, and you know what that means.

"Today, clients are asking their accountants for their insight on how best to record, report, and account for bitcoin holdings and transactions", Berger said. "And the questions are only increasing, with over 5 million holders of bitcoin today—a 7-fold increase over this time last year—and 100,000 merchants accepting bitcoin, a number that is increasing by 1,000 per week."

The demand for qualified accountants with an in-depth knowledge of digital currencies is far outpacing the current supply, he added.

Here's the pitch: Accountants can join the council for free, and take a training course that gives them the basics of digital currency. If they choose to become certified through the council, they get a 5.5-hour curriculum of 27 lessons and practice exam in preparation for the certification exam.

At present, there is no outside credentialing organization issuing the certifications. "We have been asked to partner with other organizations that issue credentials and may choose to do so over time, but to date we have chosen to issue our own certification", Berger says. That's similar to how the CFA, CFP, CPA and other designations developed, he added.

AccountingWEB has already offered some advice about bitcoin, explaining that IRS Notice 2014-21 indicates "virtual currency" will be treated as property for federal tax purposes. Berger offered these additional tips.

  • The notice referenced above is not a new law but an interpretation of existing law, so there's significant uncertainty. At least one bill is before Congress to change the tax treatment of bitcoin.
  • New accounting tools support the recording, reporting and accounting of bitcoin. For example, LibraTax is a SaaS platform designed for this.
  • A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in U.S. dollars, as of the date that the virtual currency was received. Fair market value is determined by the publicly available rates on the exchanges, consistently applied (IRS Notice 2014-21).
  • The fair market value of virtual currency paid as wages is subject to federal income tax withholding (IRS Notice 2014-21). New platforms like Bitpay and Wagepoint are offering payroll services in bitcoin.
  • The character of the gain or loss generally depends on whether the virtual currency is a capital asset in the hands of the taxpayer.

Currently, bitcoin is the only decentralized digital currency actively traded for goods and services, Berger said. There are other such currencies traded on various exchanges, but they aren't accepted by merchants to the extent that bitcoin is.

The future is far from certain, but it's becoming clear that accountants need to understand bitcoin and other virtual currencies, in order to keep up with their clients.

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About Terry Sheridan

Terry Sheridan

Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.

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By Awanderer
Jun 26th 2015 01:11

My goodness... The author drank the Council's koolaid - just because CPA's were quite slow to figure out how to record this hacking prone proto-currency (now that folks have figured out how to record it) does not mean that it still is viable. It's NOT viable as shown by the hacking, rejection by most nations wishing to control their sovereign wealth, and by a "value" that's plummeted since even speculators have lost all hope in it... That is a reality which oddly the author left out.

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By Cory Barnes
to Liz Farr
Jun 26th 2015 01:11

It's funny how you are against a money who's security is decentralized and resposnisbility is placed in the hands of each owner to protect the private spending keys. You must be ignoring the weekly credit card hacks of retailers where payment credentials are centralized and entire troves of individual accounts are put at risk at once. Maybe some people want the security that comes with a money protocol not controlled by government bankers so they won't be at risk when the next Cyprus happens? Lastly, the price of bitcoin is still 100% higher than one year ago, so I doubt all hope is lost.

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By stevearlin
to Liz Farr
Jun 26th 2015 01:11

Uhh, actually nothing about the currency/protocol has ever been hacked. You must be referring to 3rd party bank-like services which held bitcoin on behalf of customers, which were hacked. I hope you know that that's completely different, and akin to something like the Madoff scam, or MFGlobal going under, except far smaller in scale, despite the headlines. That's like saying "the dollar was hacked" by Bernie Madoff. Just no.

It also seems necessary to point out that despite your assertion that "most nations" have rejected bitcoin, there are only two (2) that have banned it, out of 190+ countries. Many are taking fairly permissive approaches, and I invite you to take a look on bitlegal dot io.

And in regard to price, since you bring it up, despite being down a lot from all-time-highs as you note, bitcoin is *still* up about $280% over the last 12 months, and almost 3000% over the past 24-months. It's really odd that *you* left that part out of your price commentary.

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By stevearlin
Jun 26th 2015 01:11

Bitcoin gets a lot of press for the price. Nice to see that more people are making an effort at real bitcoin professional education. The people and companies surrounding bitcoin are growing out of the "wild west" phase, and more professional services are needed. Great to see more resources for accountants specifically. I'm just a bitcoin enthusiast, yet friends/family/colleagues ask me bitcoin-related questions that should really be answered by an accountant all the time...

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By rkoreto
Jun 26th 2015 01:11

Thoughtful comments all around! Anyone have clients who are accepting bitcoin?

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By Neal Palmquist
Jun 26th 2015 01:11

Never was there any HONEST reason to create more than just one bitcoin.

Zero divided zero times does not equal one and those do not add up to 21,000,000.

If you have an infinitely divisible bitcoin and if I also have an infinitely divisible bitcoin then at least one of us got screwed. You cannot give a unit of measure for thin air infinite divisibility as a mathematical property and then make it go anywhere by undoing that action when you multiply it 21 million times

Bitcoin miners are suicide cult flower children freaks

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By Lindsay
Jun 26th 2015 01:11

400 members! Watch out, this is unstoppable!

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