Bitcoin, derivatives, and the IRS

Two key developments last week in the world of Bitcoin may eventually be remembered as milestones in its evolution as a mainstream payments system.

First, investors publicized a Bitcoin derivatives transaction – a “bitcoin swap” – with standardized documentation.

And second, the IRS clarified the tax treatment of Bitcoin, noting that Bitcoin is not money, but rather property.

These may not seem like momentous occurrences, but they represent the development of clear rules and market infrastructure around Bitcoin and Bitcoin transactions.