This is something my 'friend' said to me when discussing bitcoins, how do i(you) respond?
How do I respond?
That I report all my income and capital gains.
This, though for different reasons. If you need to put 'friend' in quotes, it's probably a bad idea to say or even imply that you're breaking any laws. The narcing capabilities of misguided retards are not to be underestimated.