Crowdfunding and the Taxation of Virtual Currencies
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Crowdfunding, which is the raising of funds from small private investors for many causes, has been in competition with venture capitalists in the promotion of virtual currencies and was the primary financial donor to Ethereum. The U.S. Internal Revenue Service (IRS) has taken note that the value of virtual currencies has risen to an extraordinary degree and that a number of people have received very substantial monetary gains from their exchange. Accordingly, the IRS has ruled that such gains are taxable and subject to major penalties for the failure to pay the appropriate taxes on them. The problem is how to determine who is engaged in the transactions, whether virtual currencies constitute property or currencies, how to subpoena and gain access to information about transactions, and other issues.