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Cryptocurrency Act 0f 2020 To Bring Regulatory Clarity In The United States

  • Cryptocurrency act of 2020 to clarify the power of each government agency to regulate the crypto space

The Cryptocurrency Act of 2020 has been introduced into the House of Representatives, and seeks to clarify the power of each government agency to regulate the crypto space.

Up to now multiple government agencies have been competing to regulate the crypto space, leading to a confusing mixture of laws. This is suppressing the crypto space, since crypto companies can be attacked by multiple federal agencies. For example, the Securities and Exchange Commission (SEC), the Commodities Futures Trading Commission (CFTC), the Internal Revenue Service (IRS), the Financial Crimes Enforcement Network (FinCEN), and the Department of the Treasury have been issuing laws with overlapping jurisdiction, and these laws often do not agree with each other.

The bill proposes that the CFTC regulate crypto-commodities, the SEC regulate crypto-securities, and that FinCEN regulates crypto-currencies. The bill defines crypto-commodities as economic goods or services, crypto-currencies as digital representations of fiat like stable coins, and crypto-securities as debt, equity, and derivatives instruments on the blockchain.

It remains to be seen if this law will pass, but if it does it may give the crypto space in the United States a better chance to thrive.

 

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IRS

IRS Rejects Coinbase User’s Charge of Surveillance Conspiracy

IRS

The Internal Revenue Service (IRS) has rubbished claims made by a cryptocurrency exchange Coinbase user of engaging in a surveillance conspiracy through its various regulations. The federal agency claimed in a 15 November filing in a California federal court that their actions were completely legitimate and William Zietzke, the crypto exchange user in question, had no rights that were violated.

Zietzke was requested by the IRS to hand over his financial records from 2016 and instead of furnishing them, he sued the agency in the federal court in an attempt to quash the request. According to him, the request was too broad and was not restricted to the 2016 records only. He also claimed that the request compromised his personal and financial security in the event that it got leaked by the agency.

IRS however, rubbished these claims and argued that the Washington resident was unable to prove why the summons shouldn’t be enforced. It also rejected claims that the agency was developing a database to track all cryptocurrency users. The agency also reiterated its demand for access to all records above and beyond the 2016 ones because they were needed to calculate his total tax liability.

It remains to be seen what the court decides regarding the case.

 

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Bitcoin Consolidation Stutters, US Traders Take Stock

Bitcoin Consolidation Stutters, US Traders Take Stock

The weekend rally that many Bitcoin bulls were hoping to show up has so far failed to happen, and with only the US market now left to move the price on Sunday, emerging news related to American Bitcoin traders might just be enough to put them on alert.

After yesterday’s move just above USD 10,000, bears were held at arm’s length but only for several hours. At 9:45 pm UTC, as Bitcoin made its daily high at USD 10,089, price inexplicably crashed to USD 9,513, after which it traded in an extremely narrow range until now, going to a low of USD 9,306 but now at USD 9,489 at 8:50 am UTC (CoinDesk).

The 5% drop, after the 5% rise yesterday, will be seen as a blow to bull’s hopes for some consolation during a somewhat disappointing July. There are still three days left of course, and anything could happen in this volatile market to affect sentiment, but for now, the mood is distinctly turning to a bearish one for the immediate short term of one to two months.

The whisperings of US government contractions onto Bitcoin and other cryptocurrency have been seen as good news for Bitcoin in the long term by commentators such as Pompliano, as we have been explaining in recent analyses, but for the time being, the mainstream mood is one of fear and paranoia.

As US regulators continue to push exchanges in other jurisdictions to ensure that American nationals are not allowed onto the platform, US traders who used to be able to trade online virtually anywhere are now facing concerted blocks from the major exchanges with big volumes such as Bittrex and Binance. However, since these blocks are mainly technical, from a mere blanket blocking of US IPs, a simple fix can be for traders to access via VPNs or proxies, masking their true locations. Since these exchanges also allow a significantly high daily trading limit for unverified accounts — for Binance, non-verified accounts can withdraw 2 BTC or about USD 19,000 per day, for example — then American traders can still skip around these limits quite easily.

The long arm of US law is reaching out to try and ensure exchanges stamp out these errant citizens, with major platform Bitfinex now being accused of flouting regulations by allowing US users to access their platform to trade. Bitfinex insists that it is “trying super hard” to stop this from happening, according to a report today on Yahoo Finance.

In an attempt to be transparent, Bitfinex made an official announcement admitting that one trader had managed to bypass its restrictions. In their blog post, they explained how they were tricked and lied to by the alleged New-York based user with “this kind of ‘gotcha’ sting” showing “his and our other detractors’ true motivations”:

“We have now identified this user. We correctly flagged this user’s IP address as being in the US. Notwithstanding the US IP address — which may be used by Bitfinex customers, as appropriate — our system logs demonstrate that this user represented to us several times that he was not an individual resident in the US. This person has lied to Bitfinex on multiple occasions, deliberately and wrongly concealed his location, and flagrantly violated our terms of service.”

Will Bitfinex’s statement release them from every wrongdoing? Perhaps if they can demonstrate that they did their best to prevent it, but that’s a matter for the courts to decide, should the US pursue litigation against Bitfinex.

Nevertheless, this development may not force exchanges all around the world, especially those who allow unverified users to trade on their platform, to implement more aggressive measures to stonewall US traders from even being able to create an account.

At the same time, Yahoo also published an article it calls a Public Service Announcement, warning online Bitcoin traders that the US tax agency, Internal Revenue Service (IRS) is now increasing its monitoring of Bitcoin trades and under-reported tax obligations related to the trading of cryptocurrency.

Apparently, IRS is now pushing out “an avalanche of notices” to over 10,000 crypto investors suspected to have not been fully transparent about their crypto tax reporting. The mail campaign has been dubbed as resembling a “scattergun” approach by Forbes, although hints that IRS could actually be most interested in any Coinbase accounts with a transaction history exceeding USD 20,000.

But CCN believes that this could actually be a good thing in the end, as the IRS and the US government might see that with Bitcoin’s transparency and traceability on a public blockchain, tax monitoring and reporting could actually be facilitated, and not hindered, by crypto.

So are we back at full circle again when it comes to states’ approaches to Bitcoin, starting with suspicion first and then ending with acceptance? That seems to be the plot.

 

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IRS Still Dragging Heels on Crypto Rules

The US Internal Revenue Service (IRS) moves to provide clear cryptocurrency taxation guideline to the increasing user base in the United States continues to develop at a snail’s pace with the agency responsible for collecting taxes promising Congress that it will issue new cryptocurrency tax guidance soon.

This, of course, is not the first of such promises over recent times; just last month the lack of response from the IRS in dealing with crypto taxation forced members of Congress on the blockchain committee chaired by Congressman Tom Emmer to provide clarity about filing crypto-related taxes before tax day.

The need for an update on crypto taxation is certainly needed, the last request by the blockchain committee in April stated that “the 2014 guidance by the IRS failed to address fundamental tax questions”, and further spawned more request for clarity. Five years does seem an excessive time to wait given the rise in cryptocurrency’s rise in popularity in the US, and the many questions taxpayers are now asking.

IRS Silence on Cryptocurrencies Is Deafening #Cryptocurrencies #bitcoin,crypto https://t.co/bpLQPBApRS pic.twitter.com/T2YvFMdCQ3

— BitcoinAgile (@bitcoinagile) May 13, 2019

IRS Commissioner Charles Rettig response to Emmer’s request for an update to taxation rules for crypto owners shared many similarities to past responses on the subject from the IRS:

“I share your belief that taxpayers deserve clarity on basic issues related to the taxation of virtual currency transactions and have made it a priority of the IRS to issue guidance.”

Emmer pointed out the need for urgency in his response to what appears to be IRS complacency on getting to grips with cryptocurrency and pointing taxpayers in the right direction commenting:

“… it has been over a decade since the IRS National Taxpayer Advocate identified, in its 2008 Annual Report, that the ambiguous tax treatment of virtual property and currency transactions was one of ‘the most serious problems encountered by taxpayers.”

 

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John McAfee Launches Visa Bitcoin Debit Card

Antitrust Watchdog Investigates Brazil Banks for Restricting Fintech Firms (1)

The ubiquitous John McAfee, needing no introduction to crypto converts, is never far from the news and his latest piece of that is a McAfee crypto debit card.

The card, naturally adorned with the cryptocurrency entrepreneur’s photo, just so users know exactly who created it, has been issued by Visa, and will enable users to use their crypto for purchases or to obtain cash.

A teaser for what is coming soon: The first crypto credit card accepted EVERYWHERE! pic.twitter.com/ARBIAcLQOf

— John McAfee (@officialmcafee) April 26, 2019

Originally advertised, and since corrected by McAfee, as credit cards, they clearly are not, but such debit cards play an essential role in enabling holders of cryptocurrency to use their Bitcoin as originally intended; as a source of purchasing power and convenience.

As a reminder, unless newsreaders have forgotten, McAfee is up as a 2020 presidential candidate, if only to offer himself a platform for talking about cryptocurrency and its place in the world. A further reminder is offered with each issued card with the 2020 presidential run logo, along with his photo is printed on each card; a very clever piece of canvassing. However, he did add that only the first 12,000 of such debit cards would carry his photo on them. After the first batch of 12,000 cards have been released, the others will be without his images.

Sorry – “Credit Card” was a misnomer. More like a debit card. You load it with Bitcoin then use it anywhere. We convert to local currencies. pic.twitter.com/0MRmh1PslW

— John McAfee (@officialmcafee) April 26, 2019

It is unclear which financial institutions will honor the cards at present, given his lack of popularity with the US authorities in general, particularly the IRS, who would reportedly like to talk to him about several millions of dollars in unpaid returns backdated to 2010. However, his popularity is assured with an impressive crypto community following, who hope that this is another little push designed to drag Bitcoin into the mainstream rather than a nonstarter publicity stunt.

 

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US Congress to IRS: Ambiguous Tax Treatment, a Serious Problem to Taxpayers

US Congress to IRS: Ambiguous Tax Treatment, A Serious Problem to Taxpayers

The US Internal Revenue Service (IRS) commissioner Charles Rettig received a request from members of the Congress on the blockchain committee chaired by Congressman Tom Emmer; to provide clarity about filing crypto-related taxes before tax day.

A bipartisan letter drafted by Congressman Emmer along with 20 others in the committee expressed their concerns in the form of questions about the ambiguous tax treatment of emerging exchange of value. Issues such as acceptable methods for calculating the cost basis of virtual currencies, the acceptable methods of cost basis assignment and lot relief for virtual currencies, and tax treatment of forks especially with regard to the 2017 hard fork of the Bitcoin blockchain.

In the press release, it was stated that rather than provide clarity, “the 2014 guidance by the IRS failed to address fundamental tax questions,” and further spawned more request for clarity, meanwhile, the IRS only tightened its processes and made it more difficult for taxpayers by increasing “enforcement activities against taxpayers who “misreport” their cryptocurrency transactions.”

It was the opinion of the committee that an appropriate tax filing procedure should be in order and one long overdue since the IRS released its preliminary guidance on the subject – about five years ago.

Congressman Emmer said:

“Guidance is long overdue and essential to proper reporting of these emerging assets. The bipartisan support this letter has received should send a clear message to the IRS that clear guidelines for reporting virtual currency are necessary.”

Earlier this year, it would appear that as the tax year end closes in, cryptocurrency users were on edge as to how to report their crypto earnings. In the UK, tax filing seems a step-ahead as it published a comprehensive guide (Her Majesty’s Revenue and Customs (HMRC) guidelines) detailing how crypto-related transactions for individuals are to be treated during tax reporting. Meanwhile, in the US, the IRS had only so far declared cryptocurrency taxation policies as a core campaign in 2019.

On a broader perspective, the overall attempt by the US to provide an ambient environment for the emerging asset industry continues at a rather progressive pace. Recently, a bill designed to exclude cryptocurrencies from being identified as securities was reintroduced for consideration.

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Crypto Tax Returns Need Extra Care with Increasing State Scrutiny

Crypto Tax Returns Need Extra Care with Increasing State Scrutiny

Cryptocurrency investors are needing to treat their income tax returns with more care as increasing scrutiny is cast over private crypto assets as the industry continues to develop.

Many countries around the globe have revised their tax laws over the past 12 months in order to integrate cryptocurrency assets into the annual tax return procedure.

Last year, the G20 had already begun to raise the topic; in its July report, the body’s Financial Stability Board (FSB) noted that previous analysis of crypto-asset markets, which included initial coin offerings (ICOs), had brought forth awareness surrounding significant challenges such as rapid market development, lack of transparency (with regard to identity and location of token issuers), as well as governing laws for white papers and gaps in data. In Buenos Aires in 2018, a G20 statement suggested a universal approach due to cryptocurrency’s worldwide popularity, declaring:

“We will seek solutions for the international taxation issue accompanying the digitization of the economy and will continue to collaborate.”

In December last year, the UK took its own steps in order to prepare for the future, publishing a comprehensive guide detailing the circumstances or instances in which a crypto holder, trader or someone who receives payment in the form of crypto would need to pay taxes.

Those moves built on the work laid out by the UK’s Cryptoasset Taskforce (CATF), an entity comprised of the UK Treasury and the Financial Conduct Authority (FCA), who, in a bid to regulate the nascent sector, have optimistically endeavored to examine and study cryptocurrencies and blockchain technology.

In the US, the IRS has already declared that one of their core campaigns in 2019 will be to concentrate on the taxation of cryptocurrencies after an announcement to that effect on 2 July 2018.

For holders of cryptocurrencies, there are steps that can be taken to take the pain out of the process of filing tax returns regardless of location around the globe. These include keeping tabs on where cryptocurrencies were both bought and sold and keeping a good record of such transactions.

As income is clearly something that tax officials will always target, all payouts, whether for work or mining, or any cryptocurrency received as an income, should be recorded for reference and return purposes. In this regard calculating gains and losses will be important factors. There are numerous formulae online for calculating a workable capital gain calculation. Losses can also be reported in order to lower tax bills.

Crypto tax specialists are now far more common due to the global usage of digital currency and may save a hefty tax bill.

 

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Kraken Bucks the Trend Regarding IRS Request For Users’ Crypto Details

Cryptocurrency exchange Kraken, the world’s largest bitcoin exchange in euro volume and liquidity, has said that it does not hand its client details to the Internal Revenue Service.

It has become common for some cryptocurrency exchanges to share their clients’ details with the IRS for tax purposes; a practice that continues to annoy many investors in their quest for true decentralization and increased anonymity.

The IRS requested details including transaction history of 1300 users last year from exchange giant Coinbase, an accusation which was also aimed at Kraken in terms of their readiness to pass on client details for tax purposes. The accusation has since been denied by the California-based exchange, assuring their users on Reddit that they don’t alert the IRS of clients’ crypto holdings, stating:

“We cannot provide advice in relation to inquiry on taxes. (It is also probably not advisable to take tax advice from any Reddit post or comment – and certainly not from twitter either, but you may wish to consult your own CPA, tax advisor, or tax attorney individually and privately.)”

Kraken’s response, suggesting that taking advice on Reddit was possibly a poor source of information for tax purposes, may have been aimed at an earlier post via social media by “Crypto Tax Girl” who commented on Twitter:

“For 2018, Coinbase, Kraken, and Gemini will be reporting to the IRS, so you may receive a 1099-K. A 1099-K doesn’t have any specifics about your transactions (like a 1099-B does), but it does signal to the IRS that you hold crypto.”

Kraken’s support team confirmed that this was, in fact, untrue and that they do not send end of tax year statements to the IRS and leave any tax dealings totally in the hands of their clients

The support team further clarified that they do not send end-of-the-year statements to their clients and that the clients of the platform are responsible for their own reporting. This had Reddit abuzz with attacks on the US government. One Reddit writer expressed his irritation at the likes of Coinbase handing over user details to the IRS

“There was no way the US would allow these exchanges to operate and let their customers not pay US taxes. Hell, the US forced Swiss banks to give up tax info.”

Another writer saw Kraken’s stance as a wakeup call arguing:

“Good, the faster we have exchanges getting onboard with centralized entities the faster and harder people will work to make Decentralized Exchanges a thing, we need them sooner or later and if this does not light a fire under people’s asses then I do not know what will.”

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WSJ Offers Creative Bitcoin Tax Avoidance Scheme

US business-focused news outlet the Wall Street Journal (WSJ) advised readers they could avoid shelling out taxes for their Bitcoin holdings by selling and quickly repurchasing the asset.

The analysis assumes Bitcoin to be regulated in the US by tax laws akin to that of other traditional investment forms such as bonds, as the Internal Revenue Service (IRS) first advised in 2014. That would give cryptocurrency investors the benefit of “special and often favorable” tax policies that are granted to investors.

In the US, all short-term (classified as one year or less) investment gains or losses are subject to tax rates with an upper echelon of 40.8%, while long-term profits and losses only reach 23.8%. Law specific to cryptocurrency, however, allows traders to sell and reinvest immediately in the same cryptocurrency to offset aggregate investment gains.

Jim Calvin, a CPA and cryptocurrency specialist at Deloitte Tax, put the timeframe of doing this lawfully somewhere between an hour and a day.

Unfortunately for the 2017 bull run sellers, however, tax losses can only be carried forward and not back, meaning even if they sold at a large profit, any losses this year couldn’t counter taxes owed on the prior gains.

”Almost the only good thing about investing in cryptocurrencies in 2018 was the tax break,” author of the WSJ article, Laura Saunders, wrote.

Perhaps Saunders’s tip will encourage more cryptocurrency traders to inform the IRS of their profits, as the last tax years saw just 0.04% of tax filers claim capital gains taxes from digital currency investments. Commentators at the time put this down to either cryptocurrency investors having a ”pretty high-risk tolerance” or feeling overwhelmed by unclear taxation guidelines.

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US Crypto Tax Liability Confusion Prompts Specialized Software Use

tax, income tax

Cryptocurrency users are beginning to realize that no matter which part of the world they call home, the taxman has woken up to the fact that there is government revenue to be harvested from these digital assets.

Many countries are beginning to revise tax laws to incorporate cryptocurrency profits into end-of-year declarations. This is a time of confusion for many in the US as a lot of crypto dabblers and more serious investors are still not clear on how to go about filing tax returns which include cryptocurrency assets.

Local regulations may well differ, and for some making these calculations is best left to professionals. Node 40 is a company that has now moved to offer this support after seeing a gap in the market. Described as a QuickBooks for blockchain tokens, Perry Woodin’s and Sean Ryan’s company quickly realized that Node 40 was capable of filling what still amounts to an education gap in most people’s understanding of cryptocurrencies; how does one pay tax on them, and does one really need to? Although there might be confusion, regrettably there is no escape.

Node 40 software allows users to integrate their wallets and cryptocurrency exchanges used by them over the course of the tax year to calculate what needs to be reported.  Woodin and Ryan argue it is worth knowing what is declarable to avoid strife further down the track, caused by a simple lack of the basic facts.

“If people are transacting in digital currency, it’s important that anyone understands that there’s a tax obligation on their part. Whether they’re paying their taxes or whether they’re day traders trying to make it big in the crypto world – it doesn’t matter. Any time you’re interacting with digital currency, it’s important that people understand there is a tax liability.”

Converting Bitcoin to goods or services or exchanging BTC to other cryptocurrencies could incur a tax.  This is useful information with the IRS on the warpath, having warned of a coup this year. The main problem in filing a 2018 1099-K form according to Woodin and Ryan is for those that have made significant losses due to fall in cryptocurrency prices, they will need to balance declaring such losses to write off a tax liability with the risk of drawing annual scrutiny by the IRS, “…giving the tax authorities much better visibility of people’s crypto involvement.”

The state of Ohio’s announcement that it will now accept Bitcoin as well as fiat for payment of taxes has its own problems, according to Ryan, as it creates a federally taxable event for the user, who then has to consider whether they are saving enough in fees paying in Bitcoin to offset the obligations that might be created federally.

Woodin and Ryan maintain the IRS will get sharper as they adapt emerging technologies requiring their own discrete measures, but people would be a lot happier paying these taxes if they had an easier means to do so, one that cuts through all those complicated numbers, and saves all that confusion.

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