The IRS Decision: What Does It Mean?

On March 25th, the United States’ Internal Revenue Service (IRS), issued a statement saying that bitcoins (and presumably other cryptocurrencies) are to be treated as property for tax purposes. Basically, this means that all capital gains and losses made from holding or using bitcoins must be reported for tax purposes. While many see this as an encroachment of the government into a decentralized system, others think that the ruling shows that bitcoin is becoming more mainstream.
Ideally, the ruling will affect all transactions made in bitcoin. Among other things, workers paid in bitcoin must report it as income on a Form W-2, any payment for goods must be reported, and any capital gain or loss from buying or selling bitcoin must also be reported. In order to pay the required taxes, everyone who gets (whether mining, buying, or earning) bitcoins must record the price of the bitcoins when they were acquired and the price when they are sold, in order to record a capital gain or loss. In theory, almost every transaction may involve a gain or loss that must be reported, even buying a cup of coffee, because of the volatility of bitcoin’s price. Jeffrey Hochberg, a tax attorney in New York, said that the ruling “would obviously create an accounting nightmare for taxpayers and may cause taxpayers to avoid using virtual currency.” Essentially, bitcoins will be treated like stocks and bonds. Taxes can be applied for gains made with bitcoin and up to $3000 can be deducted for losses. The ruling also affects miners, technically any income from mining should now be reported as income for tax purposes. They would also have to declare capital gains like everyone else should they sell the coins.
Many think this ruling represents too much government intrusion and the death of bitcoin as a currency, but others believe that this ruling will improve bitcoin’s standing in the mainstream view. While the ruling says bitcoin is property not a currency, the ruling may actually help investors, allowing a sense of certainty and security. The property ruling was also the lesser of two evils. Had bitcoin been ruled as a currency, the taxes for investors would’ve been much greater. Some also believe that because the IRS has recognized bitcoin, its credibility will be increased in the public eye, and it will see wider adoption.
While the announcement was certainly big news to the bitcoin community, some were quick to point out that such a ruling would be nearly impossible to enforce. Steven Rosenthal, senior fellow with the Tax Policy Center said on the IRS ruling that “Nobody in their right mind would ever comply with that,” and that “The IRS can’t even get the information they need from normal consumer purchases.” The pseudo-anonymous nature of bitcoin would make it extremely difficult for the IRS to track all purchases and catch tax evaders. Essentially, small time bitcoin users likely have little to worry about. The IRS is simply trying to catch big time tax evaders. Alex Daley, a technology investment analyst for Casey Research, said that “This ruling is a warning shot across the bow, mostly to business and large traders, that you’ll have to deal with the income tax evasion consequences.” He doesn’t think that the ruling is “a signal to consumers that we’ll take away the anonymous nature of Bitcoin.”
Regardless of whether the IRS’s ruling will be beneficial in the long run or not, the announcement in conjunction with rumors about a ban in China have driven prices down to about $450, from the $500-600 prices found just a week before.

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Auroracoin: Iceland Gets Its Own Cryptocurrency

Recently, nations have been getting their own cryptocurrencies. Auroracoin, the cryptocurrency created by the pseudonymous Icelander Baldur Friggjar Óðinsson (who may be a group or an individual), was created as a national alternative currency for Iceland. The creator or creators intended the alternative currency to give a boost to Iceland’s economy and allow for a way around tight capital controls. Unlike many cryptocurrencies, Auroracoin was pre-mined before it went public, then on March 31st, the “airdrop” commenced and each citizen of Iceland became eligible to claim 31.8 Auroracoins free of charge.
Auroracoin was launched in February, and ten million Auroracoins were pre-mined before March 31st.  The airdrop began on Monday the 31st when all 330,000 people listed in Iceland’s national ID database became eligible for claiming 31.8 Auroracoin. The creator(s) intend to give half of all Auroracoins to be created to all the citizens of Iceland free of charge, and Iceland’s national ID database makes that task rather easy.  The airdrop is expected to take around one year to be complete.
Auroracoin was created to allow the citizens of Iceland to get around tight capital controls set in 2008 by Iceland’s Central Bank in response to the global economic crisis. The controls prevent the króna (Iceland’s currency) from being used outside the country, and require foreign currencies to be handed over to the central bank. This prevents Icelanders from freely engaging in international trade. The creator(s) stated on Auroracoin’s website that “The people of Iceland are being sacrificed at the altar of a flawed financial system,” and that “The power must be taken away from the politicians and given back to the people. Cryptocurrencies are a very important milestone in this fight for liberty.” However, Auroracoin may still have some legal hurdles. Iceland’s central bank has taken notice of cryptocurrencies, especially Bitcoin and Auroracoin, and has already declared that buying bitcoins from foreign entities and using bitcoins (and presumably other cryptocurrencies) to bypass capital controls would be illegal.
Regardless, Auroracoin started out strong but its value remains highly volatile because of the ongoing airdrop. Its peak price was $5.40 USD, but it fell to around $3 on April 1st. Many predict the price will continue to fall as more Icelanders claim their free coins, but the future price of Auroracoin is truly uncertain.
While it is uncertain whether Auroracoin will be a success or not, it is not the first cryptocurrency of its kind, and many other cryptocurrencies are being created for other nations as well. The same concept is behind Mazacoin, which was launched in early 2014 and is intended to be the official currency for the traditional Lakota Nation. Like Auroracoin, it is intended to help the tribe’s economy, but is also intended to increase the tribe’s sovereignty. Mazacoin is still awaiting confirmation on whether it is truly the tribe’s official currency.
Other national-based cryptocurrencies have also sprung up in the wake of Auroracoin, also with similar goals. Scotcoin and Spaincoin, currencies for Scotland and Spain respectively, were created in the wake of Auroracoin with the intent to help the nations’ respective economies and also have a distribution system similar to Auroracoin. Only time will tell if nation-based coins are the future for cryptocurrencies.

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Coindib launches the first mobile bitcoin directory for Android devices

Sacramento, CA, 3/26/14 — Coindib is the bitcoin directory that pays you. We are proud to launch the first bitcoin directory app on Android marketplaces. Free and paid versions are immediately available on both Google Play and Amazon Appstore. An iOS version is under development and will be released upon completion.
Coindib awards ‘dibs’ to content contributors. To earn dibs, add websites or mining pools to the directory. Dibs are analogous to shares in the directory. Coindib’s advertising revenue is tallied biweekly, converted to bitcoin, and proportionately distributed to all dibholders. If you control 5% of dibs, you earn 5% of Coindib’s advertising revenue.
Coindib encourages crowdsourcing through the Develop tab at www.coindib.com/develop. Here, members direct app updates by submitting new feature suggestions and bug fixes. Suggestions with the most upvotes are prioritized in future updates. We are proudly shaped by our community‘s feedback.
The full version features searchable listings of bitcoin related resources including popular currency data. Users of the $2 full version can add and edit content on their mobile device. The free version is view only with no currency data access. The web version is available at www.coindib.com. Here, all users have full access to Coindib’s services.
Coindib is eager to become an integral resource in a community that represents the most exciting paradigm shift of the century.

First Bitcoin Derivative On Tera May Bring Regulation

On Monday, March 24, TeraExchange, a trade execution platform that deals in numerous types of cleared OTC swaps, announced that it had constructed the first derivative swap involving Bitcoin. Two U.S. firms had privately negotiated the swap, which is a mult-million dollar transaction of funds to hedge the value of Bitcoin. If the swap is transacted, it would bring Bitcoin under the scrutiny of the U.S Federal Government for the first time in its history. The contract would need to be reported to the U.S Commodity Futures Trading Commission (CFTC), which regulates futures and swaps.
TeraExchange said that it had been communicating with the CFTC and is using all of the features available on its Swap Execution Facility (SEF) but, that because Bitcoin is not regulated and not authorized to be traded on a SEF, the transaction will not actually occur on the SEF. However, if the CFTC determines that their jurisdiction covers digital currencies, then they may authorize Bitcoin being traded on the SEF. TeraExchange received permission to operate an SEF last year, which allows for more transparency and reportability.
For the most part, the fate of Bitcoin in terms of regulations is still relatively unknown. Recently the exchange Kraken.com completed an audit of its reserves, in an attempt to improve credibility after recent debacles with Mt. Gox and Vircurex. The cry for regulation has only increased in the wake of the Mt. Gox collapse, and many wish for the government to become involved as evidenced by the class action lawsuit in the U.S against Mt. Gox, and the company’s assets being frozen.
Other attempts at regulations for Bitcoin have also appeared recently. Ben Lawsky at the State Department of Financial Services in New York promoted a need for oversight which recently led to established application procedures for Bitcoin exchanges. Many believe that regulation would be a good thing. Tera President and Co-founder Leonard T. Nuara, in the press release regarding the new Bitcoin swap, said that, “Regulatory approval is crucial to the long-term growth of the market utilizing bitcoin.” The press release also said that Tera plans to make Bitcoin swaps available to eligible contract participant.
While the future of Bitcoin regulation remains uncertain, it is certain that it will continue to remain in the discussion and, if the TeraExchange development is any indication, will become more and more accepted in mainstream finance. While this new development may bring more government oversight, it is also certain to bring more widespread acceptance for Bitcoin.

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Now Vircurex: Bitcoin Exchanges See Troubled Times

Recently, what was one of the first and largest Bitcoin exchange platforms, Mt. Gox, halted all withdrawals, shut down, and declared bankruptcy. The CEO, Mark Karpelès, was once a member of the board of the Bitcoin Foundation, but resigned his position on February 23rd. The Japan-based company began having issues on February 7th, when they halted all withdrawals, citing a bug in the bitcoin software that “makes it possible for someone to use the Bitcoin network to alter transaction details to make it seem like a sending of bitcoins to a bitcoin wallet did not occur when in fact it did occur.”
After over three weeks of no withdrawals, Mt.Gox suspended all trading on February 24th and the website went offline shortly after.  Leaked documents revealed the company was insolvent and had apparently lost over 700,000 bitcoins in a theft which had gone undetected for years. The company finally filed for bankruptcy protection in Japan on February 28th, and reported they had lost over 800,000 Bitcoins, worth around 473 million USD at the time of the filing. The company also filed for bankruptcy protection in the U.S on March 9th. Mt. Gox faces several law suits, including a massive class action lawsuit in the U.S.
More troubling news for the Bitcoin community came on March 23rd when another exchange, Vircurex, announced that they were freezing all user accounts as they neared financial ruin. Vircurex is based in Beijing and had suffered multiple hacking incidents last year, and large withdrawals in recent weeks leaves the exchange with two options according to the announcement. Vircurex stated that they froze accounts to prevent the exchange from going down completely. The announcement stated that: “Unfortunately we had large fund withdrawals in the last weeks which have led to a complete depletion of our cold wallet balance and we are now facing the option of either closing the site with significant unrecoverable losses for all or to work out a solution that allows the exchange to continue to operate and gradually pay back the losses.”
Despite Vircurex’s assurances to the contrary, the developments at Vircurex are eerily similar to Mt. Gox’s issues before it went down. Many coins on Vircurex are experiencing similar behavior to Mt. Gox, where the coins were worth more than on the other exchanges. Hopefully, Vircurex there are no more surprises left from Vircurex.
Vircurex and Mt. Gox are not the only exchanges to be having issues. Recently Flexcoin and Crypto-Trade have been forced to shut down, while Poloniex promises to pay investors back after suffering a cyberattack.

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Mediabistro’s Inside Bitcoins Heads to New York City in Two Weeks – Get 10% OFF

After thousands gathered at Inside Bitcoins in Berlin, Germany on February 12-13, this innovative Bitcoin event is returning to New York City on April 7-8 at the Javits Convention Center.
Inside Bitcoins is the largest event of its kind, with over 25 exhibitors and 80 speakers exploring the opportunities surrounding the world’s largest digital currency exchange with session topics including “Best Practices for Using and Securing Bitcoins” and “Creating and Funding the Next 100 Great Bitcoin Companies”.
And don’t miss the all new Bitcoin Basics Booth, where experts will be available at the top of every hour to help bitcoin beginners set up their first digital wallet, make purchases, and more. Also taking place at the event will be the Bitcoin Trading Café, where attendees can buy and sell bitcoins in the middle of the exhibit hall floor, hosted by Bitcoin Center NYC.
A second track of conference sessions have also been added to the event and include: A Startup Perspective: Building a Trading Platform from Scratch by Luke Jones, Co-Founder of Coinarch, Bitcoin Merchant On-Ramp by Steve Beauregard, Founder & CEO of GoCoin.com, Bitcoin in the Cloud by Benjamin Gorlick, COO of CloudHashing, Bitcoin Comes To Main Street by Tyler Roye, Co-Founder & CEO of eGifter, Beyond Bitcoin: BitShares Delves Into Digital Shares by Daniel Larimer, Founder & CEO of BitShares.org, and Data Center Planning Calculator for Megawatt Mining by Eric P. Doricko a Data Center Crypto-Consultant.
We’re excited to have partnered with Inside Bitcoins to offer 10% OFF full conference passes with code SOURCE. Also, when you register now, you’ll save an extra $300 on on-site pricing.

Bittrex exchange already supports 40 cryptocurrencies

New crypto exchange already supports 40 cryptocurrencies   Bittrex launched with 10 currencies, but just after 3 weeks they already support 40 coins. You can trade well known coins like Bitcoin, Litecoin, Dogecoin or Nxt, or new cryptocurrencies like Coin2, MyriadCoin, MintCoin, GPUCoin and  Blackcoin. You can also buy new country coins Auroracoin (Iceland), AphroditeCoin (Cyprus), Mazacoin (Oglala Lakota Nation) and SpainCoin (Spain).
You can vote on new coins added to this exchange here: https://bitcointalk.org/index.php?topic=521726.0
Some of these coins were distributed preferably only via https://bittrex.com/, like GPUCoin. If you are planning to release a new coin and want to distribute it by IPO or giveaway, you can contact [email protected] find a solution.
If you want to get some free coins, you can participate on Bittrex giveaways, like here: https://bitcointalk.org/index.php?topic=511999.0
Now you can get free Mintcoins and Blackcoins. Bittrex is a next generation crypto trading platform built and operated in the United States by crypto enthusiasts with extensive development and security background.  The Bittrex team has over 50 combined years in the computer industry at companies like Microsoft, Amazon, Qualys, and Blackberry and have made careers developing secure and scalable software.
Bittrex’s mission is to deliver the fastest and most secure trading platform for the community.   Their goal is to add coins based on community demand. The infrastructure allows to add coins quickly to their exchange. The exchange has no problem with new generation crypto currencies like Nxt, where are used different API calls.
Features of Bittrex exchange:

Custom built trading engine – Bittrex’s custom trading engine was developed from the ground up with speed and scale as the priority.  Orders are executed as soon as they are placed and you will never see a crossed order book or a delay in processing of any trades.
Secure platform – Bittrex employs the latest security technologies to protect users and us.  Exchange uses an elastic multi stage wallet strategy ensuring that 80-90% of funds are offline and safe.  Additionally two-factor authentication (through email or google authenticator) is required for all withdrawals and API usage.  They designed everything from the ground up with security in mind.
Fast deposits and withdrawals – Bittrex’s fully automated monitoring platform allows for near instantaneous updates on balance, trade, and wallet information.  Users will never be left wondering where your funds are or if your deposits are blocked.  Information is always up to date.
Complete and easy REST API – Bittrex designed the most complete API set for developers to build on our platform.  Full featured set of APIs allow you to easily deposit, trade, and withdraw to and from our exchange, enabling arbitrage scenarios never possible before.  Bittrex was built with high frequency trading in mind.

Meet the Bittrex team:

Bill Shihara Bill is currently the Manager of Security Threat Analysis and Security Engineering at BlackBerry. He drives the anti-malware and security automation strategy for the BlackBerry ecosystem to protect customers from threats before they happen. Previous to working at BlackBerry, Bill spent 11 years at Microsoft working on the Windows Operating System and the Trustworthy Security team.
Rami Kawach: Rami is currently Director of Engineering at Qualys where he is the architect of their next generation vulnerability management solution and malware detection system. His background in highly scalable and available systems along with expertise in performance optimization makes him the perfect person to architect the exchange.
Richie Lai: Richie is currently the manager of the Amazon Security Operations Center and is in charge of security response and operations for Amazon. Prior to that, he spent 12 years at Microsoft building up their security engineering and internet crimes division. His background in application and network security, internet crimes and malware makes him the most paranoid person at protecting his and your crypto currencies.

For more information visit:

https://bittrex.com/
Facebook: https://www.facebook.com/bittrex
Twitter: https://twitter.com/BittrexExchange
Reddit: http://www.reddit.com/user/bittrex-bill
Contact: [email protected]