With taxes due soon, it occurred to me that the grand vision of cryptocurrencies one day replacing credit card payments is probably unlikely to happen in the near future. Each time someone pays using crypto, a taxable event is triggered (assuming the value of the crypto exceeds its cost basis). Why would someone want to incur an additional expense and headache just to pay for a coffee?
The IRS has setup a really simple to understand FAQ:
Q14. Will I recognize a gain or loss if I pay someone with virtual currency for providing me with a service?
A14. Yes. If you pay for a service using virtual currency that you hold as a capital asset, then you have exchanged a capital asset for that service and will have a capital gain or loss. For more information on capital gains and capital losses, see Publication 544, Sales and Other Dispositions of Assets.