Do I need to report to FInCEN if I had greater than $10,000 worth of bitcoin in a foreign bitcoin exchange?
Yes, I'd say you do. This is similar to reporting a brokerage account. Also, don't forget the requirements for form 8938. Lets look at possible use cases: If you ever converted your cryptocurrency to cash on a foreign exchange, then **YES** you had to report. That means if you ever daytraded and the US dollar (or other fiat) amount was $10,000 or greater when you went out of crypto, then you need to report. Because the regulations stipulate you need to report over $10,000 at any point in the year. If you DID NOT convert your cryptocurrency to cash, and only had them on an exchange's servers, perhaps traded for other cryptocurrency pairs, then NO this did not fall under the regulations. Example, In 2013 I wanted to cash out of a cryptocurrency that didn't have a USD market in the United States, but I didn't want to go to cash on a foreign exchange specifically for this reason (amongst others). So I sold my Litecoin on BTC-E (Slovakia) for Bitcoin, and then I sold the Bitcoin on Coinbase (USA).  (even though BTC-E had a Litecoin/USD market, and then I could day trade the swings easily to make more capital gains, but I wanted cash in my bank account AND didn't want the reporting overhead). Read the regulations yourself. Financial instruments that are reportable: Cash (fiat), securities, futures and options. Also, http://www.bna.com/irs-no-bitcoin-n17179891056/ whether it is just in the blockchain or on a server, IRS and FINCEN said bitcoin is not reportable on FBAR. When they update their guidance, it'll be in the news. The director of FinCEN is very active in cryptocurrency developments and guidance. Bitcoin has been around for six years, it isn't that esoteric and the government isn't that confused on what it is (IRS and FinCEN's hands are tied by Congress in how to more realistically categorize cryptocurrency) Although at this point in time, there are several very liquid exchanges within the United States, such as the one NYSE/ICE hosts (Coinbase). "Firstly you have to know exactly what you are asking here.  What you have if you ""own"" bitcoins is a private key that allows you to make a change to the blockchain that can assign a piece of information from yourself to the next person. Nothing more nothing less.  The fact that this small piece of information is considered to have a market value, is a matter of opinion, and is analagous to owning a domain name. A domain name is an entry in a register, that has equal weight to all other entries, but the market determines if that information (eg: CocaCola.com) has any more value than say another less well know domain. Bitcoin is the same - an entry in a register, and the market decides which entry is more valuable than another.  So what exactly are you wanting to declare to FinCEN? Are you willing to declare the ownership of private key? Of course not. So what then? An uncrackable private key can be generated at will by anyone, without even needing to ""own"" or transact in bitcoins, and that same private key would be equally valid on any of the 1000's of other bitcoin clones. The point I want to make is that owning a private key in itself is not valuable. Therefore you do not need, nor would anyone advise notifying FinCEN of that fact. To put this into context, every time you connect to online banking, your computer secretly generates a new random private key to secure your communications with the bank. Theoretically that same private key could also be used to sign a bitcoin transaction. Do you need to declare every private key your computer generates? No. Secondly, if you are using any of the latest generation of HD wallets, your private key changes with every single transaction. Are you seriously saying that you want to take it on your shoulders to inform FinCEN every time you move information (bitcoin amounts) around even in your own wallets? The fact is FinCEN could never ""discover"" your ownership of bitcoins (or any of the 1000s of alt coins) other than by you informing them of this fact.  You may want to carefully consider the personal implications of starting down this road especially as all FinCEN would need to do is subpoena your bitcoin private key to steal your so-called funds, as they have done recently to other more prominent persons in the community. EDIT to clarify the points raised in comments. You do not own the private key to the bitcoins stored on a foreign exchange, nor can you discover it. The exchange owns the private key. You therefore do not either technically have control over the coins (MtGox is a very good example here - they went out of business because they allowed their private keys to be used by some other party who was able to siphon off the coins). Your balance is only yours when you own the private keys and the ability to spend. Any other situation you can neither recover the bitcoin to sell (to pay for any taxes due). So you do not either have the legal right nor the technical right to consider those coins in your possession.  For those who do not understand the technical or legal implications of private key ownership, please do not speculate about what ""owning"" bitcoin actually means, or how ownership can be discovered. Holding Bitcoin is not illegal, and the US government who until recently were the single largest holder of Bitcoin demonstrate simply by this fact alone that there is nothing untoward here."
"It may seem weird but interest rates are set by a market. Risk is a very large component of the price that a saver will accept to deposit their money in a bank but not the only one. Essentially you are ""lending"" deposited cash to the bank that you put it in and they will lend it out at a certain risk to themselves and a certain risk to you. By diversifying who they lend to (corporations, home-buyers each other etc.) the banks mitigate a lot of the risk but lending to the bank is still a risky endeavour for the ""saver"" and the saver accepts a given interest rate for the amount of risk there is in having the money in that particular bank. The bank is also unable to diversify away all possible risk, but tries to do the best job it can. If a bank is seen to take bigger risks and therefore be in greater risk of failing (having a run on deposits) it must have a requisitely higher interest rates on deposits compared to a lower risk bank. ""Savers"" therefore ""shop around"" for the best interest rate for a given level of risk which sets the viable interest rate for that bank; any higher and the bank would not make a profit on the money that it lends out and so would not be viable as a business, any lower and savers would not deposit their money as the risk would be too high for the reward. Hence competition (or lack of it) will set the rate as a trade off between risk and return. Note that governments are also customers of the banking industry when they are issuing fixed income securities (bonds) and a good deal of the lending done by any bank is to various governments so the price that they borrow money at is a key determinant of what interest rate the bank can afford to give and are part of the competitive banking industry whether they want to be or not. Since governments in most (westernised) countries provide insurance for deposits the basic level of (perceived) risk for all of the banks in any given country is about the same. That these banks lend to each other on an incredibly regular basis (look into the overnight or repo money market if you want to see exactly how much, the rates that these banks pay to and receive from each other are governed by interbank lending rates called Libor and Euribor and are even more complicated than this answer) simply compounds this effect because it makes all of the banks reliant on each other and therefore they help each other to stay liquid (to some extent). Note that I haven't mentioned currency at all so far but this market in every country applies over a number of currencies. The way that this occurs is due to arbitrage; if I can put foreign money into a bank in a country at a rate that is higher than the rate in its native country after exchange costs and exchange rate risk I will convert all of my money to that currency and take the higher interest rate. For an ordinary individual's savings that is not really possible but remember that the large multinational banks can do exactly the same thing with billions of dollars of deposits and effectively get free money. This means that either the bank's interest rate will fall to a risk adjusted level or the exchange rate will move. Either of those moves will remove the potential for making money for nothing. In this case, therefore it is both the exchange rate risk (and costs) as well as the loan market in that country that set the interest rate in foreign currencies. Demand for loans in the foreign currency is not a major mover for the same reason. Companies importing from foreign entities need cash in foreign currencies to pay their bills and so will borrow money in other currencies to fulfil these operations which could come from deposits in the foreign currency if they were available at a lower interest rate than a loan in local currency plus the costs of exchange but the banks will be unwilling to loan to them for less than the highest return that they can get so will push up interest rates to their risk level in the same way that they did in the market before currencies were taken into account. Freedom of movement of foreign currencies, however, does move interest rates in foreign currencies as the banks want to be able to lend as much of currencies that are not freely deliverable as they can so will pay a premium for these currencies. Other political moves such as the government wanting to borrow large amounts of foreign currency etc. will also move the interest rate given for foreign currencies not just because loaning to the government is less risky but also because they sometimes pay a premium (in interest) for being able to borrow foreign currency which may balance this out. Speculation that a country may change its base interest rate will move short term rates, and can move long term rates if it is seen to be a part of a country's economic strategy. The theory behind this is deep and involved but the tl;dr answer would be the standard ""invisible hand"" response when anything market or arbitrage related is involved. references: I work in credit risk and got a colleague who is also a credit risk consultant and economist to look over it. Arbitrage theory and the repo markets are both fascinating so worth reading about!" "Bitcoin payments involve by far the lowest fees.  For pure bitcoin-to-bitcoin transfers you have the option of not paying any fee at all, while if you want to avoid the risk (currently very small) of miners ignoring your transaction you can pay a small transaction fee.  Currently no more than 0.0005 BTC is ever required ($0.01 at $20/BTC). Bitcoin also does not support ""chargebacks"", which is an advantage for the merchant (no risk that Paypal will freeze your account, as it did in with a Burning Man nonprofit), but more risk for the consumer. Popular sites for exchanging bitcoins with other currencies charge rates of 0.65% or less.  The primary barrier is that it typically takes a few days to get funds into your account from bank accounts etc.  Given the volatility of the bitcoin exchange rate you may want to treat bitcoin like cash, and only keep a small amount on-hand. A variety of shopping cart interfaces are supported. The obvious downside is that only a small fraction of users would be likely to go through the steps to use this option since bitcoin is new and immature, so your investment in adding support may be hard to pay off.  On the other hand, just advertising that you accept bitcoin payments would give you a bit of free advertising. Another downside is the risk of government intervention.  In NPR's 2011 story a law professor said it was ""legal for now"" in the US, but that could change. I'd say that given the sizable current fees and other barriers to international commerce and micro-payments, if bitcoin doesn't succeed, something else will." &gt;$1,000 worth of electricity to generate  The cost of Bitcoin always tracks the price of Bitcoin.   There is a fixed amount of Bitcoin available to be mined every day.  The cost to mine bitcoin rises because of competition (they increase the difficulty of the problems to maintain a fixed supply of Bitcoin).  The electricity cost to mine Bitcoin is directly related to the amount of miners, which is directly related to the current cost of Bitcoin. More people want to mine when the price is high.  If you really think about it, what you are really saying is that the intrinsic value of bitcoin is the value of Bitcoin. Its a completely circular mirage. You only have to pay taxes when you convert to dollars. Most exchanges I think have to track their users and provide them with reports for tax purposes. Just holding bitcoin and watching it go up in value does not trigger a taxable event. Well consider this, even if you bought some at every all time high prior to this one, you would have still made a profit. I was kicking myself when I passed up an opportunity to buy some at $30. After its wild ride up to $1,200 and subsequent fall, I made sure to start buying around $250. Bitcoin is not going away. There are hundreds of different cryptos out there, but Bitcoin is the gold standard and it is becoming more legitimized every day. Regulators and governments passed it off as a fad for years but are now paying attention because people are actually using it to get around all kinds of bottlenecks that exist due to the structure of the current global banking system. If you feel like it will continue to be used more extensively and become more scarce over the next several years, then it is probably worth investing at least something into it. Of course, never invest more than you can afford to lose.  Full disclosure: I hold some Bitcoin but I am mostly in Ethereum right now because I think there is greater potential there. Bitcoin is pretty expensive right now and Ethereum is still catching up to it in market cap. I think we will see some great practical uses for it in the coming years. There are already some major players involved, including the Russian State owned banks. If your concern is scams, we should be talking about counterparties, not bitcoin itself. Unless you think the protocol itself is a scam, which imo it most certainly is not.  You're conflating the trustworthiness of counterparties with the trustworthiness of the underlying protocol, which imo is not a very good model to operate by.  You'll understand the situation better of you look at them independently.  Bitcoin isn't trying to be a credit agency or the better business bureau, it's just trying to be digital money.  Don't expect it to protect you from scams any more than cash will.  That's not its job, and does not affect its trustworthiness as money. If you hold this money in USD and spend it in the US as USD, then there is no tax liability or reporting requirement at all.  You are not subject to any tax on foreign exchange gains and losses because you have not performed any foreign exchange.  CRA says a foreign exchange gain or loss happens when the fx transaction occurs—not as the currency’s value fluctuates while on deposit - and since you are never performing an fx transaction, no such issues will arise.  The CRA is not interested in how you spend your money, only the money that you earn.   The only possible tax liability that would arise in the circumstances that you describe would be the tax liability arising from interest earned while the cash in on deposit.  If this interest exceeds the threshold of reportability, then your bank will issue you with a T-slip to be included in your tax return. "As long as the IRS treats bitcoin as property, then whenever you use bitcoin to buy anything you are supposed to consider the capital gain or capital loss. There is no ""until it's converted to fiat"". You are paying local sales tax and capital gains, or paying local sales tax and reporting capital loss. As long as you are consistent, you can use either the total cost basis, or individual lot purchases. The same as other property like stocks (except without stock specific regulations like wash-sale rules :D ). There are a lot of perks or unintentional loopholes for speculators, with the property designation. There are a lot of disadvantages for consumers trying to use it like a currency. Someone mixing investment and spending funds across addresses is going to have complicated tax issues, but fortunately the exchanges have records of purchase times and prices, which you can compare with the addresses you control. Do note, after that IRS guideline, another federal agency designated Bitcoin as a commodity, which is a subset of ""property"" with its own more favorable but different tax guidelines."