Commodity or service? What is Bitcoin? May 18 2018
You know Cryptocurrency is a currency but anything described as a currency is one of two things, a service or a commodity. If it is a service, this means that there is some kind of transaction where the service is rewarded, the fiat system we are currently on is considered a service with the act of participation and belief is the currency value being the service and the paper money being the reward. When goats or gold were traded, that was currency as a commodity, someone had something rare, necessary to life, or just valuable in the eyes of the wanting and that piece of property was traded for some other marketable object. So, where does cryptocurrency fall? Is it the service of verification where the computer is rewarded in a cryptocurrency that makes it currency or is it something that is seen as valuable and therefore tradable for standardized currency that makes cryptocurrency a valid currency? That is a question still being debated. In 1971 under President Nixon the U.S adopted fiat currency and did away with the gold standard, a commodity currency making fiat, a service currency, the standard globally. Cyrptocurrency as we have learned is decentralized, and therefore unregulated, which has scared the government, so the government deemed cryptocurrency property for the time being. Being named property makes cryptocurrency a commodity and while there are plenty of people still willing to accept commodities as barter for goods and services, the government doesn’t recognize it as currency. While crypto is considered property for now, this might not always be the case and by no means does it invalidate cryptocurrency. Cyrptocurrency is at its birth, being only a decade old, the government and people alike are trying to figure out what to do with it, how to stabilize, it and most importantly how to tax it. Currently cryptocurrency is subject to the capital gains tax, which forces the owner to track the difference in value between acquisition and disposition, this is only a place holder for a real solution as there are many untraceable ways to off cryptocurrency and evade this tax. Cyrptocurrency is valuable because huge swaths of the global population say it is, in an effort to control it the government has classified it as a commodity but is it? Cryptocurrency is created through the service of solving algorithms and is given as a reward for the service of verification, that doesn’t sound like a commodity to me.
Here are a few articles on the Capital Gains Tax, and cryptocurrency as a service or commodity: