23 ms·

U.S. Treasury calls for stricter cryptocurrency compliance with IRS

124 points by ASinclair 5y ago

tldrthelaw 5y ago
It was only a matter of time. I've been advising clients to retain every scrap of information regarding every trade they make for a while now. The hammer is coming.
paulpauper 5y ago
As if it was not strict enough
swiley 5y ago
IMO: the IRS really needs to re-think the way crypto currency gets reported, the way it's actually used is more or less incompatible with the 8949 form and popular exchanges (coinbase in particular) generate reports that can't be directly converted to it.
- nrmitchi 5y ago
  > popular exchanges (coinbase in particular) generate reports that can't be directly converted to it Isn't this really more of a Coinbase issue? If my brokerage started sending me invalid forms at the end of the year, I would expect my brokerage to fix it. I wouldn't expect the IRS to change to match whatever the brokerage is sending out.
- hcurtiss 5y ago
  I use koinly.io and it does a nice job of preparing the 8949 for me, and syncs with my various wallets and exchanges. Plugs right into TurboTax.
  - filoleg 5y ago
    Bookmarked, thanks for the rec! I used Cointracker for generating tax forms from Coinbase to plug into TurboTax for the past 2 years, but Koinly website looks really nice and clean, and it feels less bloated than Cointracker, so I will give it a try next year. Especially since Cointracker started ramping up their pricing.
    - hcurtiss 5y ago
      Yeah, I subscribed to three other services before I landed on Koinly. I also like that it properly handles fees.
- qeternity 5y ago
  This seems more like a problem for Coinbase et al, and not the IRS. Unlike the SEC, the IRS doesn’t actually care how you make your money as long as they get their cut.
golover721 5y ago
This seems like a positive for the legitimization of cryptocurrency. Of course if you were trying to use it to avoid paying taxes you may feel otherwise. Hopefully it leads better forms and adoption by exchanges to provide useful tax documents.
- tluyben2 5y ago
  This is what I feel; becoming more normal. Sure a lot of people don't want to report it; don't think those people will start now anyway.
  - x3n0ph3n3 5y ago
    I think we should all be incredulous that any of this is "normal."
- the-dude 5y ago
  Be careful what you wish for.
- BitwiseFool 5y ago
  If "Legitimate" means having to comply with all these regulations and decisions from unelected bureaucrats, then I prefer fringe and bizarre.
  - vorpalhex 5y ago
    If paying your taxes and not shoveling money to criminals is "complying with regulations from unelected bureaucrats" then you have an ethical quandry as much as a practical one to sort through.
  - mrzimmerman 5y ago
    You only have to comply if you’re a US citizen or doing business as a US entity, in which case they are not unelected or are appointed by elected officials. Unfortunately for your tastes of fringe and buzzard society and people in it at large prefer stability and regular growth. I like a bit of both. We need the fringe and buzzard for society to grow and change, and as a parent and home owner I like to know that society is stable and that I’m not in danger of losing everything some how. Anyway, not an easy balance but such is living in a society.
bronzeage 5y ago
The most urgent regulation in crypto needs to deal with Tether. Exchanges are practically faking a market with fake printed dollars. I'm not touching cryptocurrencies until after Tether is banned and the scheme collapses. Imagine if you could just open an "exchange" and show your customers transactions with your monopoly dollars, and say, don't worry, my monopoly dollars are backed by real dollars, pinky promise! I see a future for crypto just not while the exchanges are unregulated and show me practically fake transactions.
mdorazio 5y ago
As someone with a decent amount of money in crypto, I welcome this. I want to pay taxes on crypto capital gains in a way that makes sense instead of trying to guess my way through it, and I also want clear rules for exchanges, pools, etc. to follow to make reporting easy at tax time.
- brightball 5y ago
  Yea, what I don't understand is how something like using ETH to buy another coin should be taxed? I totally get converting it back to dollars and calling that capital gains but trying to tax conversions from one to another seems nutty to me.
  - nightski 5y ago
    I feel like it would get really complicated to determine cost basis and actual capital gains if you did not do this. But maybe it's easy and I am missing something.
  - garmaine 5y ago
    Why? If you trade Apple stock for Tesla, it’s a taxable event. There isn’t any requirement that USD be involved.
    - dclaw 5y ago
      You do not trade 1 stock for another, you have to sell it, wait t+2 days for it to clear, then use those proceeds to buy the other stock. It's not the same in any manner.
      - novok 5y ago
        That is just a side effect about how certain exchanges work, you can still trade one good for another without using cash, and it's a taxable event because your 'liquidating' property. It's known as bartering income: https://www.irs.gov/taxtopics/tc420 https://www.irs.gov/taxtopics/tc420
RichardHeart 5y ago
With something that averages 200% a year growth, you really can just deposit your gains in your bank and pay your taxes with a smile.
- kinghajj 5y ago
  Especially for us old-timers; gotta love that long-term capital gains tax rate! Set aside some of the gains into a high-yield savings account for making estimated tax payments, pay off some small debts, buy a couple nice things, and put the rest into a brokerage account to buy Vanguard ETFs.
  - BitwiseFool 5y ago
    Isn't Joe Biden planning to make the top capital gains rate the same as the short term rate?
    - kinghajj 5y ago
      For long-term capital gains above $1m, yes. I'm not lucky enough (yet?) for that to apply to me this year anyway. Plus, that change would probably apply from 2022 onwards, so there's a chance that if another crypto bull run happens later this year (a la 2013), one could still cash out gains under the current rate structure. I also wouldn't be surprised if there's some negotiation with Republicans to raise the proposed bracket from $1m to $5-10m: pull out enough sad old widows with homes that have appreciated $1.5m+ such that the $250k exemption would still put them in the $1m+ bracket, etc.
    - standardUser 5y ago
      Only for households with earnings over $1 million. So no, not for the vast majority of people.
- DonHopkins 5y ago
  Seriously, SPAM KING Richard J Schueler, did you pay taxes on all the money you made with all the Viagra spamming you did from Panama, and all your shitcoin shilling and lying about HEX being a CD, when you should have called it HOAX? And did you do it with a smile, just like you lie so easily to all your victims with a smile? As the winner of the "Golden Pump Award" for "Best New Scam" for "HEX", and as one of the first people in the world to be successfully sued for online spam, specifically the Viagra spam scheme that you ran from Panama (which you lost, under your previous name "Richard J Schueler"), you could personally solve scams by ceasing and desisting your shilling of HEX, and your recruiting of unsuspecting developers to work on it, and your illegal false claims of providing CDs (certificates of deposit).
sandworm101 5y ago
I'm all for reporting cryptocurrency as income. Bring on the tax deductions. Now my graphics card is an expense. So too the rest of my gaming rig, a rig that spends more time mining coin than it does playing games. My power bill? What accelerated depreciation can I take on a graphics card? Did I even turn a profit this year? A few decades ago the IRS looked into rewards schemes, air miles and grocery store loyalty points. Those are technically income that must be declared. The result of the IRS investigation was that the entire are is too difficult to assess, too riddled with negative valuations that could be declared as losses (ie points that expire). I think they will come to the same conclusions for small bitcoin miners.
- Pulcinella 5y ago
  You could already do that, but generally the standard deduction is better for most people than whatever they get by itemizing.
  - sandworm101 5y ago
    Graphics cards are selling for thousands of dollars. Small dedicated mining rigs cost upwards of 10k. It doesn't take many of those to get beyond standard deductions.
  - toss1 5y ago
    GP could likely do it next week if he formed a business entity (Corp, LLC, etc.), which could properly take deductions from the first dollar of expense, as (s)he described. Form the company, fund it with initial capital, then spend on rigs, utilities, & currencies. Your costs are expense-able, profits are taxable, and it all goes on a Schedule C, K, or whatever, depending on your corp type. You can probably take loss-carry-forwards from loss-making years to apply against profitable years,, and you can still likely use the standard personal deduction. Absolutely check with your accountant and attny for local, state, national rules, this is not advice, just general experience. I'd also advise using a proper accountant to file your taxes. Accountants put their reputation (and even their liscence) on the line and reduces the chances of audit. I've known several people who got audited, all of them had the IRS write checks to them at the end, but it was a huge pain in the arse, and they all did their own taxes, which seems like kind of a red flag (or extra demerits in their scoring systems) to the IRS.
madamelic 5y ago
>could provide a regulatory moat around existing cryptocurrency exchanges Because if there is one thing we need more of, it is government-sponsored oligopolies.
AlchemistCamp 5y ago
It's completely reasonable to tax investment earnings. That said, these regulations are concerning to me as a developer interested in actually building on blockchain technology. At least from what I understand, just doing what's rapidly becoming run of the mill Web3 development is becoming extremely fraught territory for US citizens who want to comply with accounting and tax rules. It's an even bigger deterrent for students with limited ability to hire an accountant. It wouldn't have been good for the US to stifle the web 25 years ago and I don't think regulating blockchain tech worldwide will work any better than trying to restrict the export of PGP did. Talent will just leave.
- metalliqaz 5y ago
  Why can't you do run of the mill Web3 development without transferring >$10K ???
  - christiansakai 5y ago
    You need to pay gas fees to transfer/execute smart contracts.
- pradn 5y ago
  It seems to me that the US government is doing this at the right time. We're not in the early stages of cryptocurrency. We've had 10 years for lots of new ideas to mature, and we're on the verge of the most promising of all - Etherium transitioning from PoW to PoS. I'd say this is somewhat late given the Bitcoin/Etherium's popularity among small investors with much to lose, immense greenhouse gas emissions, and facilitation of ransomware and dark markets. Any crytocurrency good enough to be useful will be large enough to have an ecosystem that complies with these rules. Our society regulates money exchange for a reason. It can be put to tremendous negative use - funding criminal activities, siphoning money from public investment, etc.
  - noofen 5y ago
    > It can be put to tremendous negative use - funding criminal activities, siphoning money from public investment, etc. And just like fiat, these activities will continue in the shadows, while innovation is harmed by regulation.
raziel2701 5y ago
A carbon tax should be levied on the miners too.
- frankbreetz 5y ago
  A carbon tax should be levied on everything that emits carbon
- tick_tock_tick 5y ago
  The simplest is your electric bill should fully encompass the externalities of the electricity you use. No one is going to self report crypto mining.
  - vorpalhex 5y ago
    We want poor people to still have things like refridgerators.
    - jtsiskin 5y ago
      It’s a bit hard to disambiguate. What about a PS5, should the electricity for that be taxed higher?
      - vorpalhex 5y ago
        How this works in most areas is small amounts of electricity are subsidized and that subsidy goes away the more electricity you use. Fridge, washing machine, A/C, tv, game console or such - you are probably not paying much. Running a rack of gpus to mine the latest coin? Running a machine shop? Well, your cost is gonna start climbing.
- matheusmoreira 5y ago
  Why? You can mine cryptocurrency using solar energy.
Consultant32452 5y ago
The powers that be will not give up their monopoly not he issuance of currency lightly. Classifying crypto as an asset rather than a currency was the first step. The hand will squeeze tighter and tighter.
- pessimizer 5y ago
  They won't give it up at all, because there's absolutely no reason for them to. The reason they have this power is because they wield force legitimately, not because fiat is special.
  - Consultant32452 5y ago
    Our nation's ideological self-segregation is proceeding nicely. I don't want to argue with you or change your mind, but I don't want to share a country with you either.
    - MrMan 5y ago
      There is no such thing as a country, just a lot of trustless interactions between sovereign mafias
  - bingbong70 5y ago
    A private organization (central bank) having a monopoly on printing and lending money to your government is acting "legitimately"? Many that have studied this system would disagree.
    - dred_prte_rbrts 5y ago
      Where did you get the assertion that a central bank is a private organization? What evidence do you have for that?
      - MrMan 5y ago
        The us central bank was chartered as an independent entity because policy makers here felt that having the central bank be embedded in the ex3cutive tended to inevitably corrupt the central banks decisions and led to crashes and devaluations and various bad politically motivated outcomes.
awrence 5y ago
The burden seems to be on the business side here. So I'm not sure what changes tax wise for end users who were using centralized exchanges to monetize their holdings. If they weren't assuming the IRS was monitoring everything they were doing to begin with they were fooling themselves. It'd be interesting to see though if you opened a lightning channel with an exchange and transferred funds back and forth to yourself millions of times. Seems like that would create infinite spam and flood these reporting requirements.
drummer 5y ago
Ah yes, the government mafia wants a bigger cut. A reminder: taxation is theft and slavery. The Crypto movement was created by people who recognize that.
- archagon 5y ago
  If you really think that, then go live on an island somewhere and stop using our roads and other amenities, please.
  - ostrophonics 5y ago
    the guys who built the road were taxed on their wages and they should be mad as hell about that, too.
- dred_prte_rbrts 5y ago
  A response completely bereft of any logical argument about why taxation is "theft and slavery". Do you have any arguments that would support this assertion?
  - ostrophonics 5y ago
    it's a comment on a web forum, he doesn't have to reiterate the entire history of heterodox economics for you to be convinced its a defensible position. and anyway, it's quite besides the point since the economic argumentation is secondary to the observation that cypherpunks were an anti-taxation and anti-government - basically anarchist - subculture out of which crypto emerged.
  - xkcd-sucks 5y ago
    I don't want to support foreign wars. I don't want to support foreign aid to countries that use it to conduct wars. I don't want to support incarceration. Yet, if I don't (e.g. pay taxes), I will be imprisoned, shot, etc.
    - macawfish 5y ago
andred14 5y ago
GFY. I DO NOT consent to my hard earned money being spent on wars and experimental drugs.
jl2718 5y ago
Big brother can be a good thing, could be welcomed, if big brother was good for the user. The way they talk about this is a one-way transfer of value from the blockchain to the treasury - in a time of massive fiscal reserve from bond purchases. They would get a stronger desire to pay taxes if they gave better investor protections. Right now, there are none. Zero. You get rich, you pay half. You lose your life savings to a hack or rug pull, you get a $3000 maximum deduction on zero income. If both happen, you still owe the first half, and you still get nothing for the second half. And nobody is going to help you get your money back. You can’t sue, you can’t do anything. The current rules make it easy to end up owing dollars you’ve never had, and this happens a lot. The world of fiat is not perfect, but you pay taxes and you get the might of the US government behind your investments. Your assumptions of good faith can be backed up by jail time if you are deceived. There’s actually a choice about that. You could invest cash in illegal business that affords you no protection, but most people choose not to. Blockchain investments are crippled for US citizens on both ends, crime and taxes. The benefits of the open participation model are still compelling, just not as much. It will take broad international standards on both crime and taxes to fix this, and get Americans onto even footing with the rest of the world. Right now, US citizens are at a disadvantage compared to world counterparts, unless you are big enough to set up a subsidiary in a ‘crypto-friendly’ tax country. We tried this with the internet 30 years ago, but we did the opposite. The US was the most Internet-friendly country on earth. Regulators knew they were in a war for global market share. The result is unsurprising. We won. Everybody came here. China may have won mobile. There will be competition for crypto. Binance is currently homeless. All the biggest VC-backed projects were led by US residents that moved to Switzerland to avoid taxes, which is perfectly legal for them, but not for a US citizen. That tax advantage made them better investments. Being a US citizen is an investment liability. Apologies if this rubs you the wrong way, but, citizenship should be an advantage here, just as it is respectively everywhere else (maybe not China). People should want to pay their taxes, right? They voted for it, right? It’s not that different from any business or charity, and if the cypherpunks are correct, there will come a time where one may freely choose which society to enjoy the befits and bear the costs of membership. It won’t be free, but it will have to compete on value. The treasury is acutely aware of this for big business already, and the solution is to make it more competitive on the backs of citizens. There’s no other way! The US budget is loaded with items marked ‘mandatory’ that taxpayers today will never see the benefit of. We all love the roads; don’t pull that canard. There are great honest values in paying for the common good. But those dollars mostly seem to end up on the balance sheets of the same companies that shift the burden onto citizens, and this system of value extraction is the entire reason why a little experimental protest called Bitcoin has any value at all. If the dollar had as much transparency as Bitcoin, you could see this happening in real time. So please start your cryptocurrency regulation with actions that actually help people in this space. They want violent and exploitive criminals out. They want protection from hacks and rug pulls. They want secure asset custody. They want proven reserves. They want smart contract audits. Paying taxes could and should afford advantages well worth the cost. Think about it this way: if all agencies announced that they were going to stop all taxes and all contract enforcements for the equities market, what would happen? Absolute pandemonium. Zero liquidity. The biggest market crash in history over the next 10 minutes. Like all open source, the customers in crypto markets are building solutions to obviate those agencies out of necessity, not desire.

124 points by ASinclair 5y ago

It was only a matter of time. I've been advising clients to retain every scrap of information regarding every trade they make for a while now. The hammer is coming.

paulpauper 5y ago

As if it was not strict enough

swiley 5y ago

IMO: the IRS really needs to re-think the way crypto currency gets reported, the way it's actually used is more or less incompatible with the 8949 form and popular exchanges (coinbase in particular) generate reports that can't be directly converted to it.

nrmitchi 5y ago
> popular exchanges (coinbase in particular) generate reports that can't be directly converted to it Isn't this really more of a Coinbase issue? If my brokerage started sending me invalid forms at the end of the year, I would expect my brokerage to fix it. I wouldn't expect the IRS to change to match whatever the brokerage is sending out.
hcurtiss 5y ago
I use koinly.io and it does a nice job of preparing the 8949 for me, and syncs with my various wallets and exchanges. Plugs right into TurboTax.
- filoleg 5y ago
  Bookmarked, thanks for the rec! I used Cointracker for generating tax forms from Coinbase to plug into TurboTax for the past 2 years, but Koinly website looks really nice and clean, and it feels less bloated than Cointracker, so I will give it a try next year. Especially since Cointracker started ramping up their pricing.
  - hcurtiss 5y ago
    Yeah, I subscribed to three other services before I landed on Koinly. I also like that it properly handles fees.
qeternity 5y ago
This seems more like a problem for Coinbase et al, and not the IRS. Unlike the SEC, the IRS doesn’t actually care how you make your money as long as they get their cut.

golover721 5y ago

This seems like a positive for the legitimization of cryptocurrency. Of course if you were trying to use it to avoid paying taxes you may feel otherwise. Hopefully it leads better forms and adoption by exchanges to provide useful tax documents.

tluyben2 5y ago
This is what I feel; becoming more normal. Sure a lot of people don't want to report it; don't think those people will start now anyway.
- x3n0ph3n3 5y ago
  I think we should all be incredulous that any of this is "normal."
the-dude 5y ago
Be careful what you wish for.
BitwiseFool 5y ago
If "Legitimate" means having to comply with all these regulations and decisions from unelected bureaucrats, then I prefer fringe and bizarre.
- vorpalhex 5y ago
  If paying your taxes and not shoveling money to criminals is "complying with regulations from unelected bureaucrats" then you have an ethical quandry as much as a practical one to sort through.
- mrzimmerman 5y ago
  You only have to comply if you’re a US citizen or doing business as a US entity, in which case they are not unelected or are appointed by elected officials. Unfortunately for your tastes of fringe and buzzard society and people in it at large prefer stability and regular growth. I like a bit of both. We need the fringe and buzzard for society to grow and change, and as a parent and home owner I like to know that society is stable and that I’m not in danger of losing everything some how. Anyway, not an easy balance but such is living in a society.

bronzeage 5y ago

The most urgent regulation in crypto needs to deal with Tether. Exchanges are practically faking a market with fake printed dollars. I'm not touching cryptocurrencies until after Tether is banned and the scheme collapses. Imagine if you could just open an "exchange" and show your customers transactions with your monopoly dollars, and say, don't worry, my monopoly dollars are backed by real dollars, pinky promise! I see a future for crypto just not while the exchanges are unregulated and show me practically fake transactions.

mdorazio 5y ago

As someone with a decent amount of money in crypto, I welcome this. I want to pay taxes on crypto capital gains in a way that makes sense instead of trying to guess my way through it, and I also want clear rules for exchanges, pools, etc. to follow to make reporting easy at tax time.

brightball 5y ago
Yea, what I don't understand is how something like using ETH to buy another coin should be taxed? I totally get converting it back to dollars and calling that capital gains but trying to tax conversions from one to another seems nutty to me.
- nightski 5y ago
  I feel like it would get really complicated to determine cost basis and actual capital gains if you did not do this. But maybe it's easy and I am missing something.
- garmaine 5y ago
  Why? If you trade Apple stock for Tesla, it’s a taxable event. There isn’t any requirement that USD be involved.
  - dclaw 5y ago
    You do not trade 1 stock for another, you have to sell it, wait t+2 days for it to clear, then use those proceeds to buy the other stock. It's not the same in any manner.
    - novok 5y ago
      That is just a side effect about how certain exchanges work, you can still trade one good for another without using cash, and it's a taxable event because your 'liquidating' property. It's known as bartering income: https://www.irs.gov/taxtopics/tc420 https://www.irs.gov/taxtopics/tc420

RichardHeart 5y ago

With something that averages 200% a year growth, you really can just deposit your gains in your bank and pay your taxes with a smile.

kinghajj 5y ago
Especially for us old-timers; gotta love that long-term capital gains tax rate! Set aside some of the gains into a high-yield savings account for making estimated tax payments, pay off some small debts, buy a couple nice things, and put the rest into a brokerage account to buy Vanguard ETFs.
- BitwiseFool 5y ago
  Isn't Joe Biden planning to make the top capital gains rate the same as the short term rate?
  - kinghajj 5y ago
    For long-term capital gains above $1m, yes. I'm not lucky enough (yet?) for that to apply to me this year anyway. Plus, that change would probably apply from 2022 onwards, so there's a chance that if another crypto bull run happens later this year (a la 2013), one could still cash out gains under the current rate structure. I also wouldn't be surprised if there's some negotiation with Republicans to raise the proposed bracket from $1m to $5-10m: pull out enough sad old widows with homes that have appreciated $1.5m+ such that the $250k exemption would still put them in the $1m+ bracket, etc.
  - standardUser 5y ago
    Only for households with earnings over $1 million. So no, not for the vast majority of people.
DonHopkins 5y ago
Seriously, SPAM KING Richard J Schueler, did you pay taxes on all the money you made with all the Viagra spamming you did from Panama, and all your shitcoin shilling and lying about HEX being a CD, when you should have called it HOAX? And did you do it with a smile, just like you lie so easily to all your victims with a smile? As the winner of the "Golden Pump Award" for "Best New Scam" for "HEX", and as one of the first people in the world to be successfully sued for online spam, specifically the Viagra spam scheme that you ran from Panama (which you lost, under your previous name "Richard J Schueler"), you could personally solve scams by ceasing and desisting your shilling of HEX, and your recruiting of unsuspecting developers to work on it, and your illegal false claims of providing CDs (certificates of deposit).

sandworm101 5y ago

I'm all for reporting cryptocurrency as income. Bring on the tax deductions. Now my graphics card is an expense. So too the rest of my gaming rig, a rig that spends more time mining coin than it does playing games. My power bill? What accelerated depreciation can I take on a graphics card? Did I even turn a profit this year? A few decades ago the IRS looked into rewards schemes, air miles and grocery store loyalty points. Those are technically income that must be declared. The result of the IRS investigation was that the entire are is too difficult to assess, too riddled with negative valuations that could be declared as losses (ie points that expire). I think they will come to the same conclusions for small bitcoin miners.

Pulcinella 5y ago
You could already do that, but generally the standard deduction is better for most people than whatever they get by itemizing.
- sandworm101 5y ago
  Graphics cards are selling for thousands of dollars. Small dedicated mining rigs cost upwards of 10k. It doesn't take many of those to get beyond standard deductions.
- toss1 5y ago
  GP could likely do it next week if he formed a business entity (Corp, LLC, etc.), which could properly take deductions from the first dollar of expense, as (s)he described. Form the company, fund it with initial capital, then spend on rigs, utilities, & currencies. Your costs are expense-able, profits are taxable, and it all goes on a Schedule C, K, or whatever, depending on your corp type. You can probably take loss-carry-forwards from loss-making years to apply against profitable years,, and you can still likely use the standard personal deduction. Absolutely check with your accountant and attny for local, state, national rules, this is not advice, just general experience. I'd also advise using a proper accountant to file your taxes. Accountants put their reputation (and even their liscence) on the line and reduces the chances of audit. I've known several people who got audited, all of them had the IRS write checks to them at the end, but it was a huge pain in the arse, and they all did their own taxes, which seems like kind of a red flag (or extra demerits in their scoring systems) to the IRS.

madamelic 5y ago

>could provide a regulatory moat around existing cryptocurrency exchanges Because if there is one thing we need more of, it is government-sponsored oligopolies.

AlchemistCamp 5y ago

It's completely reasonable to tax investment earnings. That said, these regulations are concerning to me as a developer interested in actually building on blockchain technology. At least from what I understand, just doing what's rapidly becoming run of the mill Web3 development is becoming extremely fraught territory for US citizens who want to comply with accounting and tax rules. It's an even bigger deterrent for students with limited ability to hire an accountant. It wouldn't have been good for the US to stifle the web 25 years ago and I don't think regulating blockchain tech worldwide will work any better than trying to restrict the export of PGP did. Talent will just leave.

metalliqaz 5y ago
Why can't you do run of the mill Web3 development without transferring >$10K ???
- christiansakai 5y ago
  You need to pay gas fees to transfer/execute smart contracts.
pradn 5y ago
It seems to me that the US government is doing this at the right time. We're not in the early stages of cryptocurrency. We've had 10 years for lots of new ideas to mature, and we're on the verge of the most promising of all - Etherium transitioning from PoW to PoS. I'd say this is somewhat late given the Bitcoin/Etherium's popularity among small investors with much to lose, immense greenhouse gas emissions, and facilitation of ransomware and dark markets. Any crytocurrency good enough to be useful will be large enough to have an ecosystem that complies with these rules. Our society regulates money exchange for a reason. It can be put to tremendous negative use - funding criminal activities, siphoning money from public investment, etc.
- noofen 5y ago
  > It can be put to tremendous negative use - funding criminal activities, siphoning money from public investment, etc. And just like fiat, these activities will continue in the shadows, while innovation is harmed by regulation.

raziel2701 5y ago

A carbon tax should be levied on the miners too.

frankbreetz 5y ago
A carbon tax should be levied on everything that emits carbon
tick_tock_tick 5y ago
The simplest is your electric bill should fully encompass the externalities of the electricity you use. No one is going to self report crypto mining.
- vorpalhex 5y ago
  We want poor people to still have things like refridgerators.
  - jtsiskin 5y ago
    It’s a bit hard to disambiguate. What about a PS5, should the electricity for that be taxed higher?
    - vorpalhex 5y ago
      How this works in most areas is small amounts of electricity are subsidized and that subsidy goes away the more electricity you use. Fridge, washing machine, A/C, tv, game console or such - you are probably not paying much. Running a rack of gpus to mine the latest coin? Running a machine shop? Well, your cost is gonna start climbing.
matheusmoreira 5y ago
Why? You can mine cryptocurrency using solar energy.

Consultant32452 5y ago

The powers that be will not give up their monopoly not he issuance of currency lightly. Classifying crypto as an asset rather than a currency was the first step. The hand will squeeze tighter and tighter.

pessimizer 5y ago
They won't give it up at all, because there's absolutely no reason for them to. The reason they have this power is because they wield force legitimately, not because fiat is special.
- Consultant32452 5y ago
  Our nation's ideological self-segregation is proceeding nicely. I don't want to argue with you or change your mind, but I don't want to share a country with you either.
  - MrMan 5y ago
    There is no such thing as a country, just a lot of trustless interactions between sovereign mafias
- bingbong70 5y ago
  A private organization (central bank) having a monopoly on printing and lending money to your government is acting "legitimately"? Many that have studied this system would disagree.
  - dred_prte_rbrts 5y ago
    Where did you get the assertion that a central bank is a private organization? What evidence do you have for that?
    - MrMan 5y ago
      The us central bank was chartered as an independent entity because policy makers here felt that having the central bank be embedded in the ex3cutive tended to inevitably corrupt the central banks decisions and led to crashes and devaluations and various bad politically motivated outcomes.

awrence 5y ago

The burden seems to be on the business side here. So I'm not sure what changes tax wise for end users who were using centralized exchanges to monetize their holdings. If they weren't assuming the IRS was monitoring everything they were doing to begin with they were fooling themselves. It'd be interesting to see though if you opened a lightning channel with an exchange and transferred funds back and forth to yourself millions of times. Seems like that would create infinite spam and flood these reporting requirements.

drummer 5y ago

Ah yes, the government mafia wants a bigger cut. A reminder: taxation is theft and slavery. The Crypto movement was created by people who recognize that.

archagon 5y ago
If you really think that, then go live on an island somewhere and stop using our roads and other amenities, please.
- ostrophonics 5y ago
  the guys who built the road were taxed on their wages and they should be mad as hell about that, too.
dred_prte_rbrts 5y ago
A response completely bereft of any logical argument about why taxation is "theft and slavery". Do you have any arguments that would support this assertion?
- ostrophonics 5y ago
  it's a comment on a web forum, he doesn't have to reiterate the entire history of heterodox economics for you to be convinced its a defensible position. and anyway, it's quite besides the point since the economic argumentation is secondary to the observation that cypherpunks were an anti-taxation and anti-government - basically anarchist - subculture out of which crypto emerged.
- xkcd-sucks 5y ago
  I don't want to support foreign wars. I don't want to support foreign aid to countries that use it to conduct wars. I don't want to support incarceration. Yet, if I don't (e.g. pay taxes), I will be imprisoned, shot, etc.
  - macawfish 5y ago

andred14 5y ago

GFY. I DO NOT consent to my hard earned money being spent on wars and experimental drugs.

jl2718 5y ago

Big brother can be a good thing, could be welcomed, if big brother was good for the user. The way they talk about this is a one-way transfer of value from the blockchain to the treasury - in a time of massive fiscal reserve from bond purchases. They would get a stronger desire to pay taxes if they gave better investor protections. Right now, there are none. Zero. You get rich, you pay half. You lose your life savings to a hack or rug pull, you get a $3000 maximum deduction on zero income. If both happen, you still owe the first half, and you still get nothing for the second half. And nobody is going to help you get your money back. You can’t sue, you can’t do anything. The current rules make it easy to end up owing dollars you’ve never had, and this happens a lot. The world of fiat is not perfect, but you pay taxes and you get the might of the US government behind your investments. Your assumptions of good faith can be backed up by jail time if you are deceived. There’s actually a choice about that. You could invest cash in illegal business that affords you no protection, but most people choose not to. Blockchain investments are crippled for US citizens on both ends, crime and taxes. The benefits of the open participation model are still compelling, just not as much. It will take broad international standards on both crime and taxes to fix this, and get Americans onto even footing with the rest of the world. Right now, US citizens are at a disadvantage compared to world counterparts, unless you are big enough to set up a subsidiary in a ‘crypto-friendly’ tax country. We tried this with the internet 30 years ago, but we did the opposite. The US was the most Internet-friendly country on earth. Regulators knew they were in a war for global market share. The result is unsurprising. We won. Everybody came here. China may have won mobile. There will be competition for crypto. Binance is currently homeless. All the biggest VC-backed projects were led by US residents that moved to Switzerland to avoid taxes, which is perfectly legal for them, but not for a US citizen. That tax advantage made them better investments. Being a US citizen is an investment liability. Apologies if this rubs you the wrong way, but, citizenship should be an advantage here, just as it is respectively everywhere else (maybe not China). People should want to pay their taxes, right? They voted for it, right? It’s not that different from any business or charity, and if the cypherpunks are correct, there will come a time where one may freely choose which society to enjoy the befits and bear the costs of membership. It won’t be free, but it will have to compete on value. The treasury is acutely aware of this for big business already, and the solution is to make it more competitive on the backs of citizens. There’s no other way! The US budget is loaded with items marked ‘mandatory’ that taxpayers today will never see the benefit of. We all love the roads; don’t pull that canard. There are great honest values in paying for the common good. But those dollars mostly seem to end up on the balance sheets of the same companies that shift the burden onto citizens, and this system of value extraction is the entire reason why a little experimental protest called Bitcoin has any value at all. If the dollar had as much transparency as Bitcoin, you could see this happening in real time. So please start your cryptocurrency regulation with actions that actually help people in this space. They want violent and exploitive criminals out. They want protection from hacks and rug pulls. They want secure asset custody. They want proven reserves. They want smart contract audits. Paying taxes could and should afford advantages well worth the cost. Think about it this way: if all agencies announced that they were going to stop all taxes and all contract enforcements for the equities market, what would happen? Absolute pandemonium. Zero liquidity. The biggest market crash in history over the next 10 minutes. Like all open source, the customers in crypto markets are building solutions to obviate those agencies out of necessity, not desire.