Oh my. What does this mean for bitcoin payment processors like BitPay?
Say I use BTC to buy $1000 in gold from someone who uses BitPay. This exceeds the $600 reporting threshold. As BitPay is doing the BTC->USD conversion, the gold dealer gets paid in cash and has no reporting responsibility. However, in this scenario, I believe BitPay would have a reporting responsibility. Ugh.
This is not correct. I reviewed this with BCB several months ago to be sure. BitPay is a third-party payment processor that facilitates the transaction between buyer and seller. Any obligatory reporting falls on the buyer or seller. For example, there are no reporting requirements when buying a coffee or a TV from Overstock, and the reporting requirements fall on the seller when buying a car from a dealership.
When Goat bought his Lamborghini, he paid via BitPay. BitPay had no requirement to report this transaction, and probably a legal obligation
not to. However, the Lamborghini Dealership would have reported the transaction just like how they would report the transaction if Goat had paid via wire transfer or cash.