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Fans of virtual currencies congregate in some places and not in others. There’s now a way to pinpoint crypto intensity in the U.S. From circumstantial evidence, you can conclude that if you’re in an area that shows up on a crypto heat map, you’re probably surrounded by taxpayers who are young, rich or employed as coders.
Not surprisingly, California leads in the number of locales where a high percentage of the population owns bitcoin or one of its competitors. But in a state-by-state ranking, Washington beats California.….Story continues…
By: William Baldwin
Source: Where Are The Crypto Hot Spots?
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In a 2013 congressional hearing on virtual currencies, Ben Bernanke said they “have been viewed as a form of ‘electronic money’ or area of payment system technology that has been evolving over the past 20 years”, referencing a 1995 congressional hearing on the Future of Money before the Committee on Banking and Financial Services. The Internet currency Flooz was created in 1999. The term “virtual currency” appears to have been coined around 2009, paralleling the development of digital currencies and social gaming.
Although the correct classification is “digital currency”, the US government prefers and has uniformly adopted the term “virtual currency”. The FinCEN was first, followed by the FBI in 2012, the General Accounting Office in 2013,as well as the government agencies testifying at the November 2013 US Senate hearing on bitcoin, including the Department of Homeland Security, the US Securities and Exchange Commission, the Office of the Attorney General.
Attributes of a real currency, as defined in 2011 in the Code of Federal Regulations, such as real paper money and real coins are simply that they act as legal tender and circulate “customarily”.The IRS decided in March 2014, to treat bitcoin and other virtual currencies as property for tax purposes, not as currency. Some have suggested that this makes bitcoins not fungible—that is one bitcoin is not identical to another bitcoin, unlike one gallon of crude oil being identical to another gallon of crude oil—making bitcoin unworkable as a currency.
Others have stated that a measure like accounting on average cost basis would restore fungibility to the currency. Virtual currencies have been called “closed” or “fictional currency” when they have no official connection to the real economy, for example, currencies in massively multiplayer online role-playing games such as World of Warcraft. While there may be a grey market for exchanging such currencies or other virtual assets for real-world assets, this is usually forbidden by the games’ terms of service.
This type of currency, units of which may also be circulated as (printed) coupons, stamps or reward points, has been known for a long time in the form of customer incentive programs or loyalty programs. A coupon loses its face value when redeemed for an eligible asset or service (hence: flow in one direction), may be valid for only a limited time and subject to other restrictions set by the issuer. The business issuing the coupon functions as a central authority.
Coupons remained unchanged for 100 years until new technology enabling credit cards became more common in the 1980s, and credit card rewards were invented. The latest incarnation drives the increase of internet commerce, online services, development of online communities and games. Here virtual or game currency can be bought, but not exchanged back into real money. The virtual currency is akin to a coupon. Examples are frequent flyer programs by various airlines, Microsoft Points, Nintendo Points, Facebook Credits and Amazon Coin.
A virtual currency that can be bought with and sold back is called a convertible currency. A virtual currency can be decentralized, for example bitcoin, a cryptocurrency. Transacting or even holding convertible virtual currency may be illegal in particular jurisdictions and to particular national citizens at particular times and the transactor/recipient/facilitator liable for prosecution by the State.
FinCEN defined centralized virtual currencies in 2013 as virtual currencies that have a “centralized repository”, similar to a central bank, and a “central administrator”. A decentralized currency was defined by the US Department of Treasury as a “currency (1) that has no central repository and no single administrator, and (2) that persons may obtain by their own computing or manufacturing effort”. Rather than relying on confidence in a central authority, it depends instead on a distributed system of trust.
Digital currency is a particular form of currency which is electronically transferred and stored, i.e., distinct from physical currency, such as coins or banknotes. According to the European Central Bank, virtual currencies are “generally digital”, although their enduring precursor, the coupon, for example, is physical. A cryptocurrency is a digital currency using cryptography to secure transactions and to control the creation of new currency units. Since not all virtual currencies use cryptography, not all virtual currencies are cryptocurrencies.
Cryptocurrencies are not always legal tender, but some countries have moved to regulate cryptocurrency-related services as they would financial institutions. Ecuador is the first country attempting a government run a cryptography-free digital currency; during the introductory phase from Christmas Eve 2014 until mid February 2015 people can open accounts and change passwords. At the end of February 2015 transactions of electronic money will be possible.
Estonia has been exploring various possibilities for blockchain technology, such as Estcoin and the use of crypto tokens within its e-residency program, which gives both Estonians and foreigners a digital form of identification. Virtual currencies pose challenges for central banks, financial regulators, departments or ministries of finance, as well as fiscal authorities and statistical authorities. Gareth Murphy, Central Bank of Ireland, described the regulatory challenges posed by virtual currencies as relating to:
- Economic statistics
- Monetary and exchange rate policy
- Tax leakage
- Payment systems and settlement infrastructure
- Consumer protection
- Anti-money laundering
- Impact of financial regulation on financial service providers
The US Commodity Futures Trading Commission (CFTC) has determined virtual currencies are properly defined as commodities in 2015.The CFTC warned investors against pump and dump schemes that use virtual currencies.
The US Internal Revenue Service (IRS) ruling Notice 2014-21 defines any virtual currency, cryptocurrency and digital currency as property; gains and losses are taxable within standard property policies.On 20 March 2013, the Financial Crimes Enforcement Network issued a guidance to clarify how the US Bank Secrecy Act applied to persons creating, exchanging and transmitting virtual currencies.
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