Good news and bad news has just come down the pipe courtesy of the IRS. The good news? Bitcoins have received a huge boost in terms of U.S. government recognition. The bad news? If you were hoping to invest in Bitcoins for the purpose of evading taxation…it’s a no-go.

The IRS announced on Tuesday that they will treat the virtual currency as property for the purposes of taxation.

Ajay Vinze, the associate dean at Arizona State University’s business school thinks that the announcement is good for the Bitcoin.

Vinze said, “[The Bitcoin is] getting legitimacy, which it didn’t have previously.”

He also feels that this is one act by the United States government that can help put the currency “on a track to becoming a true financial asset.”

This doesn’t stop the announcement from being a headache for many American advocates of the Bitcoin. It’s thought of by many a currency rather than as property.

There is some worry that the “clarification” may do more harm than good. If Bitcoins are not only unstable, but taxable property, does this make them not worth the risk?

Pamir Gelenbe, is a partner at Hummingbird Ventures. The venture capital firm recently invested in online Bitcoin exchange Kraken.

Gelenbe understands that many who have gotten their hands on Bitcoins may be less inclined to spend them following the IRS’s decision.

“People might just be tempted to hoard rather than spend, because as soon as they spend they would be liable to incur capital gains taxes,” said Gelenbe.

The IRS not only expects taxes on capital gains. The government agency is also demanding that “miners”, persons responsible for introducing new Bitcoins into the market via unique algorithms, report the Bitcoins as part of their income.

The guidelines being set by the IRS may feel like growing pains, but growth and stability is what is needed if the Bitcoin is to maintain its global presence.

Image via Wikimedia Commons