Charles Allen, chief executive officer of BitcoinShop Inc., an online marketplace, said he'd like to see the IRS reconsider its decision as virtual currencies develop.
"The implications this decision will have on the Bitcoin ecosystem are far reaching, and will be burdensome for both individual users of Bitcoins, Bitcoin-focused business and for the general adoption of virtual currencies," he said, adding that Bitcoin users will adapt to the rules.
Bitcoin, the most popular digital currency, emerged from a 2008 paper written by a programmer or group of programmers under the name Satoshi Nakamoto. The Bitcoin network uses a public ledger to record transactions made under pseudonyms, a technological breakthrough that allows purchases and sales without using a trusted third party, such as Visa Inc. or Western Union Co.
Powerful computers that record the transactions and guard against double-spending the same currency generate new Bitcoins, a process referred to as mining. Mining has made some early Bitcoin adopters wealthy in dollar terms.