My understanding is FATCHA does not require us to declare assets we hold overseas which are not in an "account", i.e. Nestmann said we probably do not need to report bullion that we hold in our homes, yet we would need to report (even allocated) bullion in any overseas account.

Are Bitcoins a private asset or an account? And where do they reside in our possession or in the public ledger? And where does the public ledger reside?

The problem is that governments (IRS in particular) invariably interprets laws in the way that brings them the most income. So I think they can argue (in their Kangaroo rigged courts) that since the public ledger resides in at least one computer overseas, then it is reportable under FATCHA.

Okay so no big deal right? Just report it. Well what about all of you who did not report on time already and held an account that was ever worth more than $10,000? You are already liable for 5X the maximum value of the unreported account in penalties plus 5 years jail time.

And reporting marks us in the IRS computers as "potential tax avoiders". The chance of audit drastically increases.

This is one of those issues that caused me to think it just isn't worth investing in Bitcoin without 100% reliable anonymity.

I am eager for someone to refute my analysis on this.

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Disclaimer: consult your own tax attorney, I am not providing tax advice, merely discussing this issue.