Bitcoins are digital currency that is created when computers compete to solve mathematical problems and the successful ‘miner’ is rewarded with a block of new Bitcoins.

Bitcoin’s decentralized network has been programmed to release 21,000,000 Bitcoins at a progressively slower rate with the size of each batch dropping by half approximately every four years. The projected rate of zero is projected to happen in the year 2140.

The virtual currency is not supported by any government or central bank and has been described as an “individualistic monetary system.” As there is not yet, any regulatory oversight over Bitcoins, they can be traded anonymously. However don’t think that a boot won’t fall and it will likely fall retroactively. Can you spell B A N K R U P T C Y ?

At the moment; only a computer code identifies a user in a Bitcoin transaction and this code changes. However, this feature of Bitcoins may be short lived as world wide bank regulators and Securities Commissions, world wide, anticipate implementing rules to address business transactions being completed in Bitcoins c/w retroactive accounting.

Although owners store the Bitcoins in digital wallets and can transfer them over the Internet, they are not recognized as legal tender in Canada. Their value fluctuates according to demand by users.

Bitcoins are a property, and as such there are clearly tax issues. The simple solution is to treat bitcoins like you would barter. There is a value and there are exchanges of value, with gains and losses that need to be accounted for.

Bitcoins have become quite popular over the past few years, with lots of excitement and problems along the way. This digital currency is now gaining mainstream use. Tens of thousands of businesses around the world accept the virtual currency. In Canada, there are over one hundred businesses that accept Bitcoins (according to CoinMap, a website that tracks Bitcoin usage around the world). Vancouver, Ottawa and Toronto all have Bitcoin ATMs, and Montreal unveiled its first one during this month.

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