SECTION 3. MODIFICATION OF

NOTICE 2014-21

The Department of the Treasury and the Internal Revenue Service are aware that certain foreign jurisdictions have enacted laws that characterize Bitcoin as legal tender. Thus, the sentence in the Background section of Notice 201421 stating that virtual currency does not have legal tender status in any jurisdiction is no longer accurate as to Bitcoin. In addition, the Background section of Notice 2014-21 may be misinterpreted as overstating the similarity between convertible virtual currency and “real” currency because the use of convertible virtual currency, including Bitcoin, to perform “real” currency functions is limited. ² Accordingly, Notice 2014-21 is modified by revising the third sentence in the first paragraph of the Background section to read as follows:

In certain contexts, virtual currency may serve one or more of the functions of “real” currency – i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance – but the use of virtual currency to perform “real” currency functions is limited.

This change to the Background section of Notice 2014-21 does not affect the answers to the FAQs set forth in section 4 of Notice 2014-21, including Q&A-2, which concludes that convertible virtual currency is not treated as currency that could generate foreign currency gain or loss for U.S. federal tax purposes.