How Bitcoin Is Sacrificing Its Soul to Survive

It's been a wild couple months for digital currencies. This past week saw the bust of Liberty Reserve for its alleged role in billions of dollars of illicit transactions, and two days later the largest bitcoin exchange said it would now require all accounts to be verified.

For the digital currency to survive, must it sacrifice its soul? Can it thrive if it does?

To be sure, there are important differences between bitcoin and Liberty Reserve. Where Liberty was effectively a black box for transactions, controlled by a single entity, bitcoins are traded on a peer-to-peer network independent of any central authority. (Bitcoin did have its own law-enforcement episode on May 17, when the Department of Homeland Security froze the accounts of two U.S.-based bitcoin processors. The alleged misdeed: failing to properly register.)

In the Liberty Reserve case, the illegalities were brash, according to U.S. officials. One million users across the world—one-fifth of them Americans—made 55 million transactions over seven years to the tune of $6 billion, with few questions asked while Costa Rica-based Liberty collected 1 percent, investigators said. The network is thought to have been employed in the $45 million ATM heist for which eight people were arrested in May. Read more >>

Canada to tax bitcoin transactions

Canada’s Revenue Agency says users of bitcoins are obligated to pay taxes on transactions using the alternative currency, the CBC reported.

The agency told the CBC that two tax rules apply to the digital currency, depending on how it’s used. Barter transaction rules apply to bitcoins used for goods or services, according to the report.  Bitcoins bought and sold for speculative purposes are subject to captial gains or income taxes, depending on the specifics of the case, the agency says.

The real-world implications are beginning to be felt, as one realtor in Saskatoon quoted in the story has listed houses priced in bitcoins. Read more >>