Bitcoin’s Use In Online Payments Faces A Serious Regulatory Hurdle

Over the past few years, the use of Bitcoin for payments has taken a backseat to the increased focus on the digital asset’s use as a store of value. However, the payments use case is now making a comeback thanks to the development of the Lightning Network, which is a secondary protocol layer that enables cheaper, instant transfers for Bitcoin users.

Apps like Bitrefill and Fold, which both help people spend their Bitcoin at major retailers, have integrated the Lightning Network in an effort to create a more user-friendly and cost-effective experience for their users. Additionally, the relatively new startup Lolli has a master plan for eventually taking Bitcoin payments mainstream.

Longhash recently covered the general resurgence of payments-focused Bitcoin startups powered by the Lightning Network.

While the Lightning Network is improving the Bitcoin payments experience from a technical perspective, a serious regulatory hurdle remains for the cryptocurrency in terms of how it is taxed.

Bitcoin’s Tax Issue

In the United States and many other countries, Bitcoin payments are treated as taxable events. In other words, Bitcoin users should be tracking the capital gains they accrue when they buy something with the cryptocurrency. From a tax perspective, a Bitcoin payment is treated the same as a sale of one’s Bitcoin holdings.

Technically, this policy applies to everything from the purchase of a house to buying a coffee in the morning on the way to work.

How Serious is This Issue?

But how serious is this tax issue? After all, part of the cypherpunk philosophy behind Bitcoin is that the rules and regulations of the traditional financial world do not apply to this new digital cash system.

The seriousness of the tax problem was debated by Bitrefill CEO Sergej Kotliar and ShapeShift CEO Erik Voorhees…

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