To determine your basis in virtual currency that you have received in exchange for property, you should use the fair market value of the virtual currency at the time of the exchange. This basis is measured in U.S. dollars.
The legal reasoning behind this is based on the general tax principles applicable to property transactions. According to the IRS FAQ, if you transferred property to someone and received virtual currency in exchange, your basis in that virtual currency is the fair market value of the virtual currency in U.S. dollars when the virtual currency is received. This is consistent with the principles outlined in Publication 551, Basis of Assets, which provides guidance on determining the basis of property received in exchange for other property.
In summary, your basis in the virtual currency received in exchange for property is the fair market value of the virtual currency at the time of the exchange, measured in U.S. dollars.
Sources:
Rev. Rul. 2019-24
Notice 2014-21
IRS Proposed Regulations REG-122793-19
