After the Internal Revenue Service decided that bitcoin would be taxed like property, not currency, the value of the cryptocurrency has steadily dropped, making some investors nervous and providing critics with more evidence that the volatile currency was too dangerous.
By the end of last week, the value of bitcoin had slipped over 17%--over $100 per bitcoin. It had bounced back to over $500 American a bitcoin, but right now bitcoins are trading for $454, another deep drop.
Proponents see the IRS ruling as a fundamental misunderstanding of how bitcoin is used. The federal government, they think, see bitcoin as an asset that someone buys and holds, waiting and watching for the value to increase, and then, presumably, selling.
Bitcoin fans, however, believe their beloved currency is used much more like cash—being used to buy goods and services (online and off, thanks to some new developments and physical bitcoin ATMs that are supposedly coming to America soon), as well as pay employees.
Ruling bitcoin a property, then, makes it much more complicated to use the virtual currency in this everyday manner, because it brings up complex math regarding capital gains tax and requires users to basically track every time they use bitcoin.
In better news for bitcoin holders, Square Market, the mobile payment provider favorite by cool stores with an iPad, announced that they were now accepting the virtual currency.
“Sellers should never miss a sale,” wrote Ajit Varma, Square’s market lead, in a post today. We’re building tools so sellers can accept any form of payment their customers want to use. Making commerce easy means creating easy ways to exchange value for everything from a massage to a DODOcase for your iPad. In that spirit, starting today, buyers can purchase goods and services on Square Market with Bitcoin.”
Square, founded by former Twitter CEO Jack Dorsey, is taking all the risk in the bitcoin connection, because businesses will be paid automatically in US dollars, not the volatile cryptocurrency.
“Keeping it simple for the seller,” Varma writes, “the seller receives the amount of the purchased goods or services in USD and in the amount of USD advertised to the sellers" customer at the time of transaction, so the seller takes no risk on Bitcoin value fluctuations. The seller then fulfills their customer"s order. Seamless!”
Square has repeatedly assured the media that this isn’t an April Fool’s Day joke come a day early.