It’s not a coin, and it’s not a currency.
What are you buying when you buy a bitcoin? An entry in a digital log.
What is the price? It’s what someone else is willing to sell it for at that moment.
I wouldn’t be surprised if the US government declares it illegal and demands taxes on the accrued value that anyone holds.
Then the demand will fall, and the asking price will drop. Hard to know how the IRS will calculate the increase in value.
Will they treat it like Paypal and regulate it?
Or maybe they will throw their hands up in despair, and just outlaw it altogether!
It’s a big risk.
I'm no tax expert, but pretty sure any gains would be taxed as such (capital gains) once they're sold, just like stocks and etc. Our tax system relies upon self-reporting. Anyone would be wise to follow the law in that regard.
As for regulation, FinCen has issued guidance on certain aspects already.
As for risk, what isn't? Don't put all of your eggs in one basket. Especially in these times we're living in. I'd be sweating bullets right now if I had a huge 401K I was relying on for my future well being, as an example.
Actually, the most likely scenario is that the California State Franchise Tax Board will begin auditing businesses that accept Bitcoin in the state, or sell bitcoins, and assign sales tax fines to the sellers.
Any barter transaction in California is subject to sales tax, which must be paid for in cash at the time of the transaction. This policy is duplicated by many states (see BXI and later versions), though California is unique in recognizing the difference between retail and wholesale transactions.
As the old BXI cases show, however, the barter medium is also not exempt from sales taxes; someone buying Bitcoin will likely find that the seller was supposed to collect sales taxes at the time of the sale.
Now maybe there’s been some little known change that is specific to bitcoin or virtual currencies, but none that I’ve heard about yet.