We are continuing our discussion about virtual currencies and the related issues. Because this is a burgeoning technology producing a wonderful array of blockchain innovations, regulators have struggled to determine how, or whether at all, they should regulate it. It poses an array of novel legal questions, and its economic impact renders it of crucial importance. Hence, it behooves regulators to assess the market and technology in order to tailor regulation. Also, many companies are not well versed in the areas of law that might affect them. In fact, many simply follow suit, and repeat what they see other companies doing, and assume the technology’s novelty leaves them in the clear. However, it can steer them into problems, and they often will not know they are not in compliance with the legal requirements.
In general, taxation is one area where policy matters is one that unfortunately pervades most people. Congress is currently laying the groundwork for new regulations that are innovated and tailored towards virtual goods and virtual currencies. It is conducting congressional studies to see how best to accomplish the task. So, congressional hearings on the subject are a frequent occurrence on Capitol Hill.
As it stands, a number of states have already passed legislation imposing the taxation of “digital downloads.” Although, this type of legislation is not directly aimed at virtual currencies and goods specifically, some state statutes are so broad that they could effectively envelop such areas. To date, this is the extent of laws applying to virtual goods, virtual currencies, and virtual-currency transactions in our country. There has yet to be comprehensive and standard legislation that applies definitively to the whole country in these areas. As a result, specific guidance on how to comply with taxes is spotty and unreliable, and there are no institutions that shine a guiding light.