Notice 2014-21 provides that convertible virtual currency is treated as property

for federal tax purposes and that general tax principles applicable to property transactions apply to transactions using convertible virtual currency. The Background section of Notice 2014-21 defines virtual currency as a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value. The Background section also states that virtual currency does not have legal tender status in any jurisdiction. Rev. Rul. 2019-24, 2019-44 I.R.B. 1004, subsequently clarified that virtual currency does not include a representation of the United States dollar or a foreign currency.

The Background section of Notice 2014-21 describes convertible virtual currency as virtual currency that has an equivalent value in real currency, or that acts as a substitute for real currency. The Background section of the Notice also identifies Bitcoin as an example of a convertible virtual currency and explains that Bitcoin can be digitally traded between users and can be purchased for, or exchanged into, U.S. dollars, Euros, and other real or virtual currencies.