Convertible virtual currencies, such as Bitcoin, are either earned or unearned income
for SSI purposes when they can be readily exchanged into a currency with legal tender
status or otherwise be used to meet a person’s food and shelter needs. The exchange
value at the time the virtual currencies are received is countable income.
To be considered earned income, convertible virtual currencies must be:
paid as remuneration for work when an employee/employer relationship exists (wages);
paid as a royalty or honorarium that is earned income according to SI 00820.450; or
earned as a result of a valid self-employment activity (NESE).
Virtual currency “mining” and "staking" are considered self-employment when done as
a part of a trade or business. Some creators of non-fungible tokens (NFTs) may receive
royalties which may be earned or unearned income depending on whether the person is
engaging in a trade or business. For factors indicating the existence of a trade or
business, see RS 01802.001 - RS 01802.010.
Virtual currencies that are not earned are unearned income. They are countable income
unless an income exclusion applies (e.g., the infrequent or irregular income exclusion).
For resource treatment of any retained virtual currency, see SI 01140.208.
Virtual currencies that are purchased with an individual’s own existing funds are
not income, but a conversion of a resource from one form to another, per SI 00815.200. For example, if a recipient uses money from their savings account to purchase Bitcoin,
the Bitcoin is not income in the month of purchase, but a resource that has changed