The payments use case is now making a comeback thanks to the development of the Lightning Network, which is a secondary protocol layer that enables cheaper, instant transfers for Bitcoin users. While the Lightning Network is improving the Bitcoin payments experience from a technical perspective, a serious regulatory hurdle remains for the cryptocurrency in terms of how it is taxed.
In the United States and many other countries, Bitcoin payments are treated as taxable events. In other words, Bitcoin users should be tracking the capital gains they accrue when they buy something with the cryptocurrency. From a tax perspective, a Bitcoin payment is treated the same as a sale of one’s Bitcoin holdings. Technically, this policy applies to everything from the purchase of a house to buying a coffee in the morning on the way to work.