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I don't know what jurisdiction you are in, but as far as I know, crypto is treated as a capital asset in the US, not a currency, so I'm unprepared to deal with

I don't know what jurisdiction you are in, but as far as I know, crypto is treated as a capital asset in the US, not a currency, so I'm unprepared to deal with the tax consequences of using it as a currency. If I paid for things with it then every transaction would require calculating capital gains/losses. And it's far worse than conventional assets like stocks because at least the brokers track that stuff for you.

Baeocystin 5y ago
You're absolutely right that the current US tax laws are a real problem for crypto-as-a-currency. I do expect better law to prevail over time.
rglullis 5y ago
We can have the cake and eat it too: it's called stablecoin. 1. Park your ETH/WBTC/BAT (a whole bunch of other tokens) on a smart contract as collateral so that you can withdraw a token that is pegged to the USD, or just go to a regular exchange to buy the stablecoin. 2. Use this token to make transactions online. Tax advantages: you are not selling your volatile crypto, so you don't have to declare any sales or profits. On the other hand, if the crypto you place loses so much in value to the point where the smart contract liquidates you, you don't need to return the stable token and you can get a tax write-off.
- davidcbc 5y ago
  This isn't how tax laws work. Exchanging one cryptocurrency for another is a taxable event. You are committing tax fraud.
  - kolinko 5y ago
    Depends on jurisdiction. In Poland the official government stance now is that only exchange into fiat is taxable. (which is absurd, but I won’t be the one to complain)
  - rglullis 5y ago
    It's not an exchange. It's a loan with a collateral. It's only an "exchange" if you get liquidated, which means that you were forced to sell it at a loss.
    - davidcbc 5y ago
      Doesn't this assume you only get liquidated below your initial purchase price? With something as volatile as cryptocurrency it's not exactly a crazy idea that you'd buy at say $30k, take a loan at $60k and get liquidated at $50k and get stuck with a big tax bill
      - 55555 5y ago
        Yes but in that case you did enjoy 20k of capital gains and so it makes sense* to pay tax on the 20k gain. There is no issue.
  - jkhdigital 5y ago
    Nope. It’s called a collateralized loan, and is one of the fun tricks that show how absurd and illogical income taxation really is.
    - jude- 5y ago
      You seem certain that the IRS has never considered this possibility before.
  - alasdair_ 5y ago
    This is exactly how tax laws (ridiculously) work, at least in the USA. It uses the same “trick” billionaire CEOs use when they borrow against their shares to fund spending, instead of selling some shares and calling it “income”.
- perl4ever 5y ago
  My impression is stablecoins are still taxed as property, even if they don't fluctuate as much. Going through the same hassle but not having as much fluctuation seems like solving 20% of the problem. And if you peg your money to fiat, aren't you just ending up back where you started? What you're describing sounds essentially like being my own brokerage back office to provide cash services to myself. That's nice for people who enjoy that sort of thing, I guess.
  - rglullis 5y ago
    > And if you peg your money to fiat, aren't you just ending up back where you started? Not if you are talking about the idea that only crypto allows you to transact without a middleman and without the risk of having your funds seized or your account canceled. But if you are simply talking about crypto as an way to invest: I can tell where I can park USDC and DAI and get 2% returns per month - and have gotten that consistently for the last 8 months. Can you tell me any traditional bank that can offer this good of a deal?
    - vineyardmike 5y ago
      > Can you tell me any traditional bank that can offer this good of a deal? Well banks offer lower rates of interest, but they're FDIC insured, they have nice (ish) apps, they have regulations to protect consumers, etc. I can tell you PLENTY of places i've parked my money (for the last 8 months) that have gotten much more than 2% return - but they don't have FDIC insurance (just like crypto).
    - staticman2 5y ago
      You don't get 2% a month unless there's a significant risk of losing your money. That's just basic economics- high returns only come with high risk. In other words it's nothing like a bank and should not be compared to one.
      - kobasa 5y ago
        That's under the presumption of efficient markets where there's perfect information across all market pariticipants which isn't the case currently with DeFi.
2muchcoffeeman 5y ago
In the parents defence, the tax status of crypto has nothing to do with the technical capability of using Bitcoin for trade. I think we can all agree, that if both parties are willing, I can use bitcoin to buy things.
- perl4ever 5y ago
  You can do whatever if you are willing to take the risk, but US federal tax returns are now specifically asking if you own any cryptocurrency, which seems like at least a mild threat they might come after you.
- esolyt 5y ago
  Sure. If both parties are willing, you can also use pokemon cards to buy things. The main point of the comment is that it's not convenient and common to use crypto to buy goods and services yet.
  - aserafini 5y ago
    The current desktop UX (today) of using cryptocurrency to order takeaway food from the market leading delivery platform in Germany is actually MORE convenient than Visa in my experience. Visa: get card from wallet, type in number, type in CSC code. Cryptocurrency: pull out phone, scan QR code.
    - perl4ever 5y ago
      But do they give you a significant discount for crypto vs. a credit card? In the US you can get a 2% rebate on what you spend with a credit card. In effect, you are credited back most of the merchant fees baked into transactions. In which case cash or crypto requires a >2% discount to break even.
    - is_true 5y ago
      I'm from Argentina and all you need to remember is the CCV. And sometimes not even that
  - 5y ago
birdyrooster 5y ago
Which is why you use coinbase and they tell you the cost basis and then you use cointracker to import it into turbotax. It's just some extra overhead when filing taxes.

Baeocystin 5y ago

You're absolutely right that the current US tax laws are a real problem for crypto-as-a-currency. I do expect better law to prevail over time.

rglullis 5y ago

We can have the cake and eat it too: it's called stablecoin. 1. Park your ETH/WBTC/BAT (a whole bunch of other tokens) on a smart contract as collateral so that you can withdraw a token that is pegged to the USD, or just go to a regular exchange to buy the stablecoin. 2. Use this token to make transactions online. Tax advantages: you are not selling your volatile crypto, so you don't have to declare any sales or profits. On the other hand, if the crypto you place loses so much in value to the point where the smart contract liquidates you, you don't need to return the stable token and you can get a tax write-off.

davidcbc 5y ago
This isn't how tax laws work. Exchanging one cryptocurrency for another is a taxable event. You are committing tax fraud.
- kolinko 5y ago
  Depends on jurisdiction. In Poland the official government stance now is that only exchange into fiat is taxable. (which is absurd, but I won’t be the one to complain)
- rglullis 5y ago
  It's not an exchange. It's a loan with a collateral. It's only an "exchange" if you get liquidated, which means that you were forced to sell it at a loss.
  - davidcbc 5y ago
    Doesn't this assume you only get liquidated below your initial purchase price? With something as volatile as cryptocurrency it's not exactly a crazy idea that you'd buy at say $30k, take a loan at $60k and get liquidated at $50k and get stuck with a big tax bill
    - 55555 5y ago
      Yes but in that case you did enjoy 20k of capital gains and so it makes sense* to pay tax on the 20k gain. There is no issue.
- jkhdigital 5y ago
  Nope. It’s called a collateralized loan, and is one of the fun tricks that show how absurd and illogical income taxation really is.
  - jude- 5y ago
    You seem certain that the IRS has never considered this possibility before.
- alasdair_ 5y ago
  This is exactly how tax laws (ridiculously) work, at least in the USA. It uses the same “trick” billionaire CEOs use when they borrow against their shares to fund spending, instead of selling some shares and calling it “income”.
perl4ever 5y ago
My impression is stablecoins are still taxed as property, even if they don't fluctuate as much. Going through the same hassle but not having as much fluctuation seems like solving 20% of the problem. And if you peg your money to fiat, aren't you just ending up back where you started? What you're describing sounds essentially like being my own brokerage back office to provide cash services to myself. That's nice for people who enjoy that sort of thing, I guess.
- rglullis 5y ago
  > And if you peg your money to fiat, aren't you just ending up back where you started? Not if you are talking about the idea that only crypto allows you to transact without a middleman and without the risk of having your funds seized or your account canceled. But if you are simply talking about crypto as an way to invest: I can tell where I can park USDC and DAI and get 2% returns per month - and have gotten that consistently for the last 8 months. Can you tell me any traditional bank that can offer this good of a deal?
  - vineyardmike 5y ago
    > Can you tell me any traditional bank that can offer this good of a deal? Well banks offer lower rates of interest, but they're FDIC insured, they have nice (ish) apps, they have regulations to protect consumers, etc. I can tell you PLENTY of places i've parked my money (for the last 8 months) that have gotten much more than 2% return - but they don't have FDIC insurance (just like crypto).
  - staticman2 5y ago
    You don't get 2% a month unless there's a significant risk of losing your money. That's just basic economics- high returns only come with high risk. In other words it's nothing like a bank and should not be compared to one.
    - kobasa 5y ago
      That's under the presumption of efficient markets where there's perfect information across all market pariticipants which isn't the case currently with DeFi.

2muchcoffeeman 5y ago

In the parents defence, the tax status of crypto has nothing to do with the technical capability of using Bitcoin for trade. I think we can all agree, that if both parties are willing, I can use bitcoin to buy things.

perl4ever 5y ago
You can do whatever if you are willing to take the risk, but US federal tax returns are now specifically asking if you own any cryptocurrency, which seems like at least a mild threat they might come after you.
esolyt 5y ago
Sure. If both parties are willing, you can also use pokemon cards to buy things. The main point of the comment is that it's not convenient and common to use crypto to buy goods and services yet.
- aserafini 5y ago
  The current desktop UX (today) of using cryptocurrency to order takeaway food from the market leading delivery platform in Germany is actually MORE convenient than Visa in my experience. Visa: get card from wallet, type in number, type in CSC code. Cryptocurrency: pull out phone, scan QR code.
  - perl4ever 5y ago
    But do they give you a significant discount for crypto vs. a credit card? In the US you can get a 2% rebate on what you spend with a credit card. In effect, you are credited back most of the merchant fees baked into transactions. In which case cash or crypto requires a >2% discount to break even.
  - is_true 5y ago
    I'm from Argentina and all you need to remember is the CCV. And sometimes not even that
- 5y ago

birdyrooster 5y ago

Which is why you use coinbase and they tell you the cost basis and then you use cointracker to import it into turbotax. It's just some extra overhead when filing taxes.