UC Law Science and Technology Journal


Eli Cole


Cryptocurrency has been called “a fraud” by some and “the next internet” by others. However, since the first Bitcoin was mined in 2009, the growth of the cryptocurrency market capitalization has been exponential—surpassing $800 billion at the beginning of 2018. Not surprisingly, the regulations governing these digital pieces of property have lagged the economic growth. In this Article, I attempt to answer the question: should 26 U.S.C. § 1031 apply to an exchange between cryptocurrencies?

This Article argues that the Internal Revenue Service’s decision to classify cryptocurrency as property, combined with the Securities and Exchange Commission’s hesitancy to classify all forms of cryptocurrency as securities, paves the way for taxpayer use of the like kind exchange between cryptocurrency. A future IRS ruling stating such would be in line with both past IRS and federal court rulings. The IRS has been liberal in the allowance of like kind exchanges in the past – doing so here would reduce the amount of complexity for the IRS and the taxpayer, while increasing revenues over time. Although the Tax Cuts and Jobs Act of 2017 disallows like kind exchanges of personal property starting in 2018, this Article is relevant for transactions that predate the 2018 tax reform.