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The IRS still defines cryptocurrency as a "product", not a security. [1] It is to be treated as such in your taxes. I think that's the best indicator of the s
by redm 9y ago
The IRS still defines cryptocurrency as a "product", not a security. [1] It is to be treated as such in your taxes. I think that's the best indicator of the state of affairs. They provided detailed guidelines and answer many common questions 2014. [2] That may change but I'm pretty comfortable with not treating it as a security for the moment.
Also, since were treating it as a product, I view contributing to Ether based ICO's as not a sale of my "product" since the product is still the same, just tied to a smart contract. I see it the same as buying a physical product and then exchanging it for another physical product at the same store. I don't incur taxes when I exchange.
[1] https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidance https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidan...
[2] https://www.irs.gov/pub/irs-drop/n-14-21.pdf https://www.irs.gov/pub/irs-drop/n-14-21.pdf
- mtgx 9y agoI think if you're offering your cryptocurrency/token in a crowdsale/ICO, then it should be seen as a security, because you're essentially offering people the opportunity to "invest" in your company's potential future.
- vasilipupkin 9y agohmmmm. So, kickstarter campaigns are also issuing securities? are airline miles securities ?
- dpiers 9y agoUnder the Howey Test, a transaction is an investment contract if: - It is an investment of money - There is an expectation of profits from the investment - The investment of money is in a common enterprise - Any profit comes from the efforts of a promoter or third party There is no expectation of profit from a Kickstarter contribution. You are buying a product, and have no stake in the company.
- dagw 9y agoYou are buying a product You're not even doing that, since there is no guarantee of delivery.
- vasilipupkin 9y agowhat about airline miles? the only reason to get airline miles is an expectation of profit - if it's cheaper than paying cash. that difference is a profit. ( I don't think miles are a security, just as ethereum isn't ).
- Sleeep 9y agoNo airline miles are not a security. They are non-negotiable, you can't sell them, they expire, they don't represent an ownership interest.
- vasilipupkin 9y agonegotiability, ability to sell, expiration and ownership interest are not part of howey test op described
- smokeyj 9y agoI mean, maybe if the currency is pre-mined and you're buying a token from a seller. But what about Satoshi? Did Satoshi issue a security by releasing the blockchain? I mean, all he did was write a program and released it in the wild. That fact that other people decided to give value to his tokens doesn't mean he sold securities to the general public. I think we need to reconsider from the ground up how securities should be regulated. There's been some promising rhetoric with the Jobs act but it seems like mostly talk with the SEC dragging their feet. I remember explaining Reg-D to a progressive friend of mine. His initial reaction was that I'm making the law up, and there's no way the government actively prevents non rich people from early stage investing. We took a bet and I won. When I told him reg-d is backed by progressives then all of a sudden he saw the value in it. Funny how that works.
- s73ver 9y agoThe only way you could think that is if you also believe that patents on existing processes, but then add "On a computer" are new and novel things. Just because something is using a blockchain does not mean it's new, or that what is happening doesn't fall under existing securities law.
- smokeyj 9y agoYou can't patent software so thanks for making my point. You can't patent math either. Crypto is math based money so now the SEC is basically trying to regulate math. Any reasoning person will see the futility in that. Paradigm shifts require new rules. You can't regulate a car the same way you regulate a horse. But when we allow buggy whip manufacturers to influence regulators for the interest of their personal bottom line, then the public looses while the intrenched interests win. https://en.wikipedia.org/wiki/Red_flag_traffic_laws https://en.wikipedia.org/wiki/Red_flag_traffic_laws
- s73ver 9y agoWrong on all counts. Software was patentable in the US. And there was a long, long time where there were a lot of patents whose only "innovation" was doing something on a computer. "Crypto is math based money so now the SEC is basically trying to regulate math. Any reasoning person will see the futility in that." Any reasoning person will know that what you said is not accurate in the least. "Paradigm shifts require new rules" This is NOT a paradigm shift. Literally you are arguing to go back to the days when software was patentable, and that "on a computer" should be all that's required to get a patent. "You can't regulate a car the same way you regulate a horse." No, but I can regulate what they are trying to do, which is provide transportation, the same. Likewise, these coins are not doing anything new. They are doing the exact same thing, just in a new package.
- zby 9y agoThe tying to a smart contract is what is important - otherwise the token would not have any value. This is like paper - which is a commodity (product) and ink which is also a commodity (product) - versus a security written with the ink on the paper which is something else.
- josaka 9y agoI think the SEC's position is that, for purposes of securities law, some cryptocurrencies are securities and some are potentially not. Presumably, it'll turn on the Howey test noted in this thread. Whether it counts as a security for tax law purposes is probably orthogonal.
- s73ver 9y agoUsually when you do that, you get another version of the same item back. I highly doubt that the IRS will share your view.