Media Coverage
Source: Daily Journal
Media Coverage
09.23.14
The IRS in 2013 passed guidance identifying virtual currencies as taxable property, prompting the Financial Crimes Enforcement Network to announce that anyone offering to exchange bitcoins and other such currencies for traditional money must be licensed money transmitters. Because the recommendations refer to virtual currency generally and not a specific type of the currency, some video games and virtual worlds may be soon be required to obtain federal and state money transmitter licenses. The games most likely to be affected are virtual worlds—such as Second Life, which allows users to turn virtual dollars into real money—and free games that offer users the option to pay money for in-game extras.
Because virtual currency is still an emerging technology and it remains unclear how the IRS would enforce rules related to its use, lawyers who work with gaming clients say the companies are facing real uncertainty as they develop new products and explore business models that might incorporate the currency.
Due to the uncertainty about how the IRS will implement any new rules, Deborah Thoren-Peden, a Corporate & Securities partner and co-leader of the firm’s Privacy, Data Security & Information Use team, says the best practice for video game makers is to address the guidance but to structure their games to fall outside of it or see if they can take advantage of an exception.