A cryptocurrency is a form of virtual currency that does not exist in physical but digital form, is not backed by any government or central bank of any country, or underlying asset. However, it has an active market and is listed on specialized sites called exchanges. An exchange is a site that allows trading between different currencies, digital and Fiat (fiduciary currency). Exchanges are financial markets that allow, under the free game of supply and demand, to give an economic value to bitcoin. Experts from Results Tax Accountants will try to explain the concept of digital currencies in this post.
Concept of digital currencies
Bitcoin is considered a virtual currency. In essence, it is a unit of digital value that can be exchanged electronically. It has no physical existence. Its creation and monitoring are done through a computer network, using complex mathematical formulas, and not through a single authority or organization.
The popularity of bitcoin is increasing, although it is true that it is far from other payment systems, its adoption is growing every day. It is worth mentioning that in some countries its use is already widespread and they consider it as a means of payment. This happens, for example, in Japan, Sweden and Switzerland, among others. Nevertheless, in other countries its use is illegal.
What is bitcoin?
Bitcoin is a consensus network that enables a new payment system and a fully digital currency. It is the first peer-to-peer decentralized payment network powered by its users without a central authority or intermediaries. From a user point of view, bitcoin is like money for the internet. Bitcoin may be the only triple accounting system in existence.
Usage of Cryptocurrencies in the world
More and more people and businesses are accepting bitcoin, restaurants, cafes, internet portals, personal services, etc., since your payment is very easy to make from an application or virtual purse/wallet installed on your smartphone or desktop, by entering a recipient’s public address and a user’s private key or the QR code and the amount to pay and just giving it Send. And getting them is also relatively easy today, since you can buy them at a foreign exchange house —exchanges—, receive as payment for personal goods or services, buy from trusted people or buy with a credit card on certain internet portals and at ATMs. When talking about bitcoin, you have to talk about cryptocurrencies and you have to know that there are already about 2,400 cryptocurrencies in the world, such as Ethereum, Litecoin, Dash, Ripple, etc. and each one has a particular use and that have been gaining value over time.
Bitcoin is known as electronic money; many businesses around the world receive it as a form of payment and others keep it for its valuation. In accordance with the national regulations of the Civil Code and the Commercial Code, it would be considered as an intangible asset of real right whose transactions would be assimilated to a swap. The accounting treatment would be Inventories or Intangible depending on the economic activity of the entity, whose tax effects would be part of the Gross Equity of the taxpayer.