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Tax laws have not kept pace with the rapid evolution and exponential growth of cryptocurrency. As a result, taxpayers have had to struggle to determine how to apply the tax rules to cryptocurrency and various transactions involving cryptocurrency. In 2014, the Internal Revenue Service issued some limited guidance concerning the tax treatment of cryptocurrency. The guidance created more questions than answers since it only applied well-established tax principles to cryptocurrency and did not take into consideration the unique characteristics and complexity of this new technology. Since the issuance of the guidance, cryptocurrency has continued to develop, and many questions remain unanswered. This paper discusses the evolution of the taxation of cryptocurrency, current tax rules of cryptocurrency, areas where additional guidance is needed, and some proposals for the future tax treatment of cryptocurrency.

Taxation, Accounting, Law