As of today, Bitcoin is in money limbo. In the majority of countries throughout the world, Bitcoin is not illegal or completely unregulated. Virtual currencies like Bitcoin are basically digital money that does not have the backing of any official authority or governing body. Most governments are trying to decide how to handle this issue.
In an online article, CNNMoney highlights that the problem is virtual currencies make it difficult to determine the identity of account holders. Because it is almost impossible to precisely determine how the money is spent, Bitcoin could cause a country’s central bank to be unable to manage the supply of money as well as inflation. Consequently, a number of governments are a little nervous about Bitcoin. In fact, Iceland stopped the influx of bitcoins, because its central bank limits how citizens can send money overseas. Vietnam took it one step further by making transactions with Bitcoin or other digital currencies illegal.
While Iceland and Vietnam took a clear stance against using Bitcoin, other countries are in murky waters. In some countries central banks are cautioning customers about the volatility of Bitcoin, some of them are thinking about how to regulate it and other countries are figuring out how to tax it. In the U.S., the IRS has created tax rules for Bitcoin as the government adopts more of a “wait and see” approach.