In its simplest form Bitcoin is a currency, like the Australian dollar or the Euro. How it differs from traditional currencies, is that it is not controlled by any government and does not have physical characteristics; it exists only in the digital world. To that end when you look a little deeper it begins to resemble a hybrid between gold and fiat currency. For more information on the basics refer to: http://en.wikipedia.org/wiki/Bitcoin

As an accountant I am preoccupied with the economic and legal implications of the crypto currency. 

From an economics perspective:
  • Supply: There are about 12 million Bitcoin on the market and supply is capped at 21 million, a finite supply
  • Government: The currency is not controlled by any government, which means it is not subjected to inflation and capital control
  • Speculation: Bitcoin is the most volatile market I have ever seen, and it's hard to ascertain the "true value" of the currency

From a legal perspective:
  • Anonymity: Bitcoin is more or less anonymous, making it possible to transact online anonymously, this has obvious implications on the black market and money laundering, gone are the days of briefcases full of cash
  • Taxation: While governments are trying to figure out the tax implications, I am confident it will be treated as any other currency
  • Hacking: There have be many stories of DDoS attacks on exchanges and the use of botnets to illegally mine Bitcoin, all of which a cause for concern
Locally, only a few physical retailers have jumped on the bandwagon. Our firm is contemplating it, but like many, we're waiting on clarification from the Australian Taxation Office before proceeding. While Bitcoin has the potential to become a true global currency, but for it to work the price needs to settle down and some of the discussed issues will need to be addressed. In the meantime, we will continue to watch this with great interest.
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