I can see how this statement would be applied to bitcoin and other virtual currencies, but wouldn't you think they would use some of the other examples to clarify what else they consider "convertible virtual currency" by saying "Points, Frequent Flyer and/or Rewards programs?" I'm probably expecting too much.
In my head I want to think that this broad of a definition could also mean that buying of stamps, trading cards, comic books or other items that could be sold later would also fall under that umbrella, but then again they don't fit the "acts as a substitute for real currency" piece? Is it also because you buy the things I mention above, but the other you receive additional to some other transaction?
Honestly looking for clarification on this. I don't deal in the Points/Rewards game at all but know others who do.
...wondering how long before in-game currencies for games like Eve and World of Warcraft get the same treatment.
Very good question
Right now we're involved in a sort of "money" game. In that game it's now the state vs. the people. Since money can theoretically be anything how it's defined is of importance, given the influence on people's lives and respective positions.
This is where legal tender laws come in. In order to protect the interests of ordinary people the U.S. Constitution, supposedly the highest law in the land, specifically states only gold and silver coin can be legal tender. Given that, anything else is not legally "money". There was a time when there were thousands of privately issued currencies in the U.S., similar to today's gift certificates, points etc. These currencies could be traded, but this was viewed as barter since they were generally only redeemable for goods from the issuer, not gold and silver.
Now to your question. The U.S. government is in the peculiar predicament of trying to appear legitimate while propping up a system clearly deemed illegitimate in the words of its own law -- dollars, or Federal Reserve Notes, are now as redeemable for gold as toilet tissue.
Bitcoin enters the picture and adds an interesting dynamic to the game. Due to its decentralized nature the government can't simply use force to shut it down. Instead, governments must take a legal position on it. This is where we are today.
The Fincen guidance states:
In contrast to real currency, "virtual" currency is a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency.
One of the attributes of "real" currency is being legal tender in some jurisdiction. Since Bitcoin, points, even video game currency, operate like a currency in some in environments, but are not legal tender anywhere, they are all in the same category: virtual currency.
So the guidance the IRS and FinCEN issues can't apply to Bitcoin
only and nothing else. It must apply equally to other instruments behaving the same way, meaning the money transmission regulations and now tax guidance apply.
