The digital currency Bitcoin has been getting lots of media attention lately, with vigorous arguments being made both for and against its use. This article from CNNMoney, for example, estimates that over 26,000 businesses worldwide are accepting Bitcoin payments via BitPay, the biggest processor of such transactions. The article cites several business owners who feel that accepting Bitcoin for goods and services helps to attract new customers, reduce payment processing fees and give their businesses an advantage over less “high-tech” competitors. The Nobel Prize-winning economist Paul Krugman, on the other hand, recently wrote a blog post entitled “Bitcoin is Evil”. He argues that while Bitcoin might be a good medium of exchange (or might not—he’s not convinced), the question still remains whether anything exists to place a stable floor underneath this virtual currency’s value.
Any U.S. business considering using Bitcoin must be familiar with the tax consequences, of course. Barbara Weltman, guest blogger on the Small Business Administration website, does a good job of explaining some of the implications of the recent I.R.S. ruling that Bitcoin is considered to be property, not currency, for federal tax purposes. She briefly reviews what the I.R.S. ruling means for business owners who receive Bitcoin as payments for goods and services or who pay employees in Bitcoin. Take a look here at the complete blog post.