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Bitcoin is a decentralized digital payment network and asset; it is not issued or guaranteed by the US government. Federal agencies classify Bitcoin as a commodity rather than legal tender, and the IRS treats it as property for federal income-tax purposes. Those labels answer different questions: they do not make Bitcoin government-backed money, exempt transactions from tax, or establish that every crypto-related product is regulated in the same way.
How Bitcoin works
Bitcoin is a peer-to-peer network that allows people to send digital value without a central bank or payment company running the network. Participants follow shared, open-source rules for validating transactions and issuing new bitcoin. Bitcoin.org describes it as a consensus network for a digital payment system.
When someone sends bitcoin, the network checks whether the sender is authorized to spend it. Confirmed transfers are recorded on a shared public ledger called the blockchain. Cryptography helps protect the ledger’s integrity and transaction ordering; it does not make the price stable or eliminate user and platform risks.
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A Bitcoin wallet is software or a device interface used to create and manage addresses and authorize transfers. It does not hold coins like a physical wallet holds cash. Bitcoin remains recorded on the network, while the private keys associated with it enable the holder to authorize spending. Anyone with the relevant keys can potentially control those funds.
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- BITCOIN EXCLUSIVE, PHONE VERIFICATION: Bitkey is designed from the ground up exclusively for bitcoin — a dedicated hardware wallet for secure bitcoin storage. Approve transactions with a tap using your phone and NFC. No device screen is required.
- SELF-CUSTODY, NO EXCHANGE OR CUSTODIAN REQUIRED: You hold two of the three keys in the Bitkey system – one on your phone and one on your Bitkey device. The third is stored on Bitkey’s server and cannot move your bitcoin on its own.
- NO SEED PHRASE: Set up and use Bitkey without creating or storing a seed phrase.
- 2-of-3 MULTISIG: Three keys are stored separately across your phone, Bitkey device, and Bitkey’s server. Any two keys are required to move your bitcoin.
- BUILT-IN RECOVERY: Encrypted backup and recovery tools can help you regain access if you lose your phone or Bitkey device. You can also designate a Recovery Contact.
Bitcoin.org recommends using a new address for each payment. Before sending, check the address and transaction details carefully: Bitcoin transfers are generally irreversible, so a mistaken or fraudulent transfer may not be recoverable.
Is Bitcoin legal in the United States?
For the federal classifications described by US agencies, Bitcoin is a commodity under the Commodity Exchange Act and does not have legal-tender status. The CFTC’s consumer advisory makes both points. In its April 22, 2026 explainer on crypto assets and federal securities laws, the SEC also lists Bitcoin as a digital commodity within the framework it describes.
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- Supports 1000s of Coins & Tokens: Securely handle thousands of assets, including Bitcoin, Ethereum, and more, all in one wallet
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These categories are not the same as legal tender. Bitcoin is not US dollars, and a business is not required by the cited federal classification to accept it as payment. Nor should the SEC’s framework be read as blanket approval of every Bitcoin-related product or transaction. The classification of Bitcoin itself does not mean that every service, offering, or activity involving digital assets is treated identically under federal law.
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On July 29, 2025, the SEC announced that it had approved orders allowing authorized participants to create and redeem Bitcoin and Ether exchange-traded product (ETP) shares in kind. That is a market-structure development, not an endorsement or guarantee of an ETP, and it does not remove market risk. An ETP share is also different from controlling private keys and using the Bitcoin network directly.
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- Unparalleled Security: Protect your assets with EAL 6+ Secure Element, offering robust defense and complete transparency
- Simple & Secure Interface: Manage your digital assets easily with a clear OLED screen for secure on-device confirmations
- Supports 1000s of Coins & Tokens: Securely handle thousands of assets, including Bitcoin, Ethereum, and more, all in one wallet
- Effortless Asset Management: Monitor and transact seamlessly with Trezor Suite, our intuitive desktop and mobile app
- Enhanced Backup Solution: Multi-share Backup eliminates single points of failure for secure cold wallet recovery
How US federal taxes apply to Bitcoin
The IRS treats digital assets, including Bitcoin, as property for federal income-tax purposes. General property tax principles apply. Selling Bitcoin for US dollars or similar currency can require you to recognize a capital gain or loss, subject to applicable rules and limits on deducting capital losses. Simply holding Bitcoin is not, by itself, a sale.
The IRS separates its guidance by transaction date: its earlier virtual-currency FAQ generally addresses transactions completed before January 1, 2025, while its digital-asset FAQ covers transactions on or after that date. The IRS uses “digital asset” for Bitcoin and other qualifying assets recorded on a cryptographically secured distributed ledger, among other assets.
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- Quantum-ready security: Get protection against future threats with the first-ever hardware wallet designed with quantum-ready architecture.
- See every detail with confidence: Our largest high-resolution color touchscreen makes it easy to navigate your assets, review transactions and manage your coins with clarity.
- Wireless freedom with encrypted Bluetooth control: Manage, buy, swap and stake securely using Trezor Suite on desktop or mobile. Qi2-compatible wireless charging keeps your Trezor powered up. No cables required—security meets convenience.
- Works seamlessly with Android, iOS and desktop: Connect wirelessly or via USB-C to your phone or computer. Manage your crypto anywhere with our companion Trezor Suite app.
The tax result can depend on what you did and when, how you acquired the bitcoin, its basis, and whether the activity involved investment, business receipts, mining, gifts, or another situation. Consult the current IRS digital-asset guidance or a qualified tax professional for tax-year-specific reporting and advice about your transactions.
Ways to acquire Bitcoin and custody choices
Bitcoin.org lists several ways to acquire bitcoin: buying it through an exchange, receiving it as payment for goods or services, or exchanging directly with another person. Mining is another way the network issues bitcoin, but that does not make it a simple or guaranteed route for an individual. The CFTC advises consumers to research platforms and wallets before entering payment-card details, wiring money, or sharing sensitive personal information.
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- Effortlessly build your crypto portfolio via the all in one Ledger Wallet app: buy, sell, send, receive, swap, stake and more across popular blockchains. 15,000+ coins & tokens in a single dashboard. Keep a close eye on the market. Compare service providers. Track performance. Get timely alerts. Build your portfolio with confidence.
- Effortlessly build your crypto portfolio via the all in one Ledger Wallet app: buy, sell, send, receive, swap, stake and more across popular blockchains. 15,000+ coins & tokens in a single dashboard. Keep a close eye on the market. Compare service providers. Track performance. Get timely alerts. Build your portfolio with confidence.
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| Route | Who controls the private keys? | Main consideration |
|---|---|---|
| Self-custody wallet | You control the keys. | You are responsible for safeguarding keys and recovery information, verifying transfers, and maintaining access. |
| Custodial exchange account | The service controls or manages the keys on your behalf. | You depend on the provider’s security, solvency, and account-access processes. |
| Exchange-traded product | You hold product shares, not the private keys for bitcoin on the network. | The product has its own structure and risks; it does not provide direct on-chain use. |
The available official material does not establish that one route is universally safer or cheaper. Your choice depends in part on whether you need to make on-chain payments, want direct key control, or prefer a financial product. Fees, tax records, account access, provider exposure, and the product’s structure are also relevant; check the terms of any service or product you consider.
Protect access and recovery information
- Keep private keys and recovery phrases secret. Do not give them to someone claiming to be support staff.
- Use a secure, backed-up recovery method appropriate to your wallet. Losing the keys or recovery information may mean losing access to the bitcoin.
- Verify recipient addresses and amounts before confirming a transfer; a wrong address or unauthorized transfer may be irreversible.
- Research the provider and wallet before sharing personal or payment information. A dedicated hardware wallet is optional, not a requirement, and it cannot prevent market losses, user mistakes, or recovery-information theft.
Bitcoin’s risks and what adoption figures do—and do not—show
Bitcoin’s market value is determined by supply and demand and can be more volatile than traditional fiat currencies, according to the CFTC. A working protocol does not eliminate investment losses, fraud, unauthorized access, software or hardware failure, or third-party failure. If futures are traded on margin, leverage can amplify both gains and losses.
Federal Reserve Board findings published in 2026 provide context about cryptocurrency activity, not a Bitcoin-only count. In its survey about 2025, 9% of respondents reported buying cryptocurrency or holding it as an investment during the past year, 2% reported using cryptocurrency to buy something or make a payment, and 1% reported using it to send money to friends or family. The questions referred to cryptocurrency such as Bitcoin or Ethereum, so those figures should not be interpreted as Bitcoin ownership or payment rates specifically.
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