16 ms·

This is more than a privacy disaster. It is so far so vaguely worded (maybe deliberately?) that the government can target everyone in the ecosystem with penalti

This is more than a privacy disaster. It is so far so vaguely worded (maybe deliberately?) that the government can target everyone in the ecosystem with penalties: While the language is still evolving, the proposal would seek to expand the definition of “broker” under section 6045(c)(1) of the Internal Revenue Code of 1986 to include anyone who is “responsible for and regularly providing any service effectuating transfers of digital assets” on behalf of another person. These newly defined brokers would be required to comply with IRS reporting requirements for brokers, including filing form 1099s with the IRS. That means they would have to collect user data, including users’ names and addresses. The broad, confusing language leaves open a door for almost any entity within the cryptocurrency ecosystem to be considered a “broker”—including software developers and cryptocurrency startups that aren’t custodying or controlling assets on behalf of their users. It could even potentially implicate miners, those who confirm and verify blockchain transactions. The mandate to collect names, addresses, and transactions of customers means almost every company even tangentially related to cryptocurrency may suddenly be forced to surveil their users.

hkt 5y ago
"forced to surveil their users" Or as it is otherwise known, abide by the same KYC rules as banks. I'd guess the vague wording is to allow regulators and the judiciary to respond flexibly to changing practices. It might be broad but it isn't poor lawmaking: it does exactly as it intends to. Even using brokerage as an analogy makes sense to respond to a system in which by design almost everyone of significance is a middleman of some kind. Fundamentally this is what will allow bitcoin to thrive: this is part of the process of becoming legitimised. It isn't what the crypto-libertarians hoped for, but what they hoped for in the beginning was endless deflation, untaxable income and speculative gains. It wasn't good for anyone but them. This is a step to something better, namely a new financial system in which upstarts are able to enter quickly and on technical merit alone. That is worth a lot, and won't happen without bitcoin entering the regulated mainstream.
- KingOfCoders 5y ago
  It's basically the same with the GDPR, it talks more about principles than companies or technologies to be able to adapt to a fast changing field - which I appreciate as a citizen but as an implementor I prefer the checklists of PCIDSS which are not vague.
- mattwilsonn888 5y ago
  Bitcoin already is regulated - piling on as much regulation as possible isn't what's going to make it more main stream. This bill allows the request to treat miners as brokers, which is absurd considering that not all miners operate in the U.S. Any miner that does operate in the U.S. will hash locally and send verified blocks from international nodes, so it won't work anyways. Upstarts are able to enter quickly based on technical merit alone RIGHT NOW. How does adding regulation simplify that for them? It doesn't - it makes it far more restrictive. You must be on crack to believe these provisions "help" crypto assets. This bill goes against the design philosophy of peer-to-peer transactions.
  - hkt 5y ago
    > This bill goes against the design philosophy of peer-to-peer transactions. Yes: because that design philosophy is counter to that of consumer friendly, regulated markets. What will make bitcoin mass market is the ability of regular investors to get involved with the kind of safety net regulations require. The alternative being that bitcoin maintains its already shady reputation as something for money laundering and buying drugs (crack, perhaps?) online. Cleaning up that reputation and its causes is the job of regulation, and it will work.
    - jkepler 5y ago
      However, a far larger portion of illicit drug transactions are for cash dollars than for bitcoin; estimates are 2-5% illicit transactions globally in fiat currencies, and about 0.34% illicit in bitcoin in 2020 (a rate that's fallen significantly since 2019 as we see more mainstream early adoption if bitcoin [1]. This proposed regulation doesn't address the problems you evoke, and its an attack on fundamental human rights such as privacy. [1] https://www.forbes.com/sites/haileylennon/2021/01/19/the-false-narrative-of-bitcoins-role-in-illicit-activity/ https://www.forbes.com/sites/haileylennon/2021/01/19/the-fal...
      - cinquemb 5y ago
        > However, a far larger portion of illicit drug transactions are for cash dollars than for bitcoin The regulatory system, and people who are ok with deferring to it in its existing incarnation (i.e. the revolving door between people within TBTF bailouts-every-day with "open" "market" operations banks [where these cash dollars inevitably end up] and the people who "look" after them system), are fine with this because slaps on the wrists and fines are considered the cost of doing business and there can't be anyway possible to live and exchange value without them being involved under the guise of "protection" or "else" racket. Robin Hanson would probably call this phenomenon a form of "Elite Tax" on society. [0] [0] https://www.overcomingbias.com/2021/08/how-high-our-elite-tax.html https://www.overcomingbias.com/2021/08/how-high-our-elite-ta...
- noduerme 5y ago
  How can anyone enter the market quickly with an app that takes crypto as payment, if you have to register as a broker and meet KYC standards? Suppose you want to sell character costumes or start a subscription podcast in crypto, rather than paying royalties to Apple or having payment processing through Visa. Are you going to demand ID verification from all your listeners? It basically makes it so onerous to a startup that no innovation can happen
  - trasz 5y ago
    Can you give example of a cryptocurrency startup which innovated anything useful?
    - astoor 5y ago
      > Can you give example of a cryptocurrency startup which innovated anything useful? This is a trap I've seen many technical folks on HN fall into - they define "useful" along the lines of "beneficial", or "productive", or "worthwhile", rather than simply "is used". Think of casino tokens. They have no intrinsic value, and can only be used within very limited set of environments, so you could think of them as useless in the strict sense. But that doesn't stop large numbers of people using large numbers of them on a regular basis, and the operators make hundreds of billions a year from the people using them, so they are "useful" in the sense of "being used" to serve a strong human desire (just not to make the world a better place).
      - trasz 5y ago
        As opposed to defining “useful” along the lines of “generating profit”. So, sure, cryptocurrency startups can innovate a new way of making money. But it doesn’t make them useful. One could argue it doesn’t even make them not harmful.
        astoor 5y ago
        I would also prefer "useful", as in "capable of being put to use", to apply to uses with net positive outcomes for society - I was just trying to make the point that, unfortunately, many others don't.
- RHSeeger 5y ago
  The fact that the government routinely threatens to "throw the book" at people, using various "vaguely worded" laws, to get them to plead guilty to crimes they may or may not have committed (without their time in court) is a prime reason why those laws are bad. > We believe you had drugs on you, even though we couldn't find them. We also see you play World of Warcraft and that you're used the in game auction house to sell your items for in game money to other players. If you don't please guilty to the drug charge, we're going to hit you with 1,000+ counts of of violations of the IBCSP (or whatever this law is called); you'd be looking at 1,000 years in prison and a 1,000,0000$ fine, minimum. The US government _does_ things like that. And, as such (because they have shown they cannot be trusted to act in the spirit of the law), we need to limit what powers we give them. I find it astonishing that anyone doesn't realize this.
colechristensen 5y ago
Is it really a privacy disaster? Blockchain is already a privacy disaster as all of your transactions are on a public ledger. It just puts a nail in the coffin of the idea that blockchain is going to be some libertarian dream of freedom from regulation and a magic bullet for getting around rules. Of course this was coming.
christophilus 5y ago
> responsible for and regularly providing any service effectuating transfers of digital assets Do they define digital assets? Because my Google Doc is a digital asset. If I transfer it to a friend, is Google now a broker?
- deleted 5y ago
  [deleted]
- Communitivity 5y ago
  I would suspect that under the current proposed wording, yes. Facebook, Google, etc. all become brokers. This could be a means for the government to go after social platforms and get transparent vies on all the social media activities of U.S. citizens. It is scary.
pjc50 5y ago
This should be read along with https://news.ycombinator.com/item?id=28042185 https://news.ycombinator.com/item?id=28042185 "Wealthy Americans Targeted by U.S. in Panama Tax-Fraud Probe". The fundamental question is "should paying tax be optional for rich people?" Large parts of the crypto ecosystem believe that the answer should be "yes". The US government believes the answer should be "no".
- genocidicbunny 5y ago
  Not only should 'paying tax be optional for rich people' be illegal, it should be heavily punished. If you are rich, and you avoid taxes, you should be punished extremely harshly, to the point of poverty or termination.
  - lifty 5y ago
    When the rules make it illegal to not pay tax then rich people will pay tax. The rules are made in such way that people can avoid paying tax, legally. So you should call your representative and make it clear that you want it, but I doubt they will listen to you.
    - Retric 5y ago
      A great deal of tax avoidance strategies used by the rich are illegal, but the IRS either doesn’t notice or frequently chooses not to prosecute them. A recent great example of why they don’t notice. Rich individual 1 was paying for an employee’s children/grandchildren to go to school while deducting that money from his salary via a second set of books. Rich individual avoids payroll tax, employee avoids income tax, and on the surface it looks legal except the second set of books made it a clearly illegal action. It’s exactly that mix of personal and business activities that makes such criminal evasion so hard to track. Another interesting example of not prosecuting, personal Roth IRA’s may not invest in companies under specific conditions and transactions must be at the fair market rate. Rich individual 2 broke both rules, but the IRS investigation decided to leave it alone. This is adding up to hundreds of millions of dollars in tax fraud, but if the IRS chooses not to prosecute then he’s free and clear. PS: Names redacted to avoid political discussion.
pembrook 5y ago
> regularly providing any service effectuating transfers of digital assets I fail to see how this is a "privacy disaster." It looks like crypto brokers are going to be treated like all other brokerages. Do you also call it a "privacy disaster" when your bank account requires your name and address so they can report interest payments to the government? Or when Robinhood/Schwab/Vanguard/Etc send the IRS a list of all your stock transactions for the year in a form 1099? Bitcoin is basically digital gold, and just like with gold, when you chose to buy or sell it the convenient way (eg. through an ETF instead of actual physical gold), it gets reported to everybody. You can always custody your own bitcoin and find partners to transact with directly and choose not to report it (like with physical gold), but, similar to physical gold, it will be extremely cumbersome, risky, and not worth your time to do so.
- bgitarts 5y ago
  Yes I call it a "privacy disaster" when your bank account requires your name and address so they can report interest payments to the government. Or when Robinhood/Schwab/Vanguard/Etc send the IRS a list of all your stock transactions for the year in a form 1099.
- miracle2k 5y ago
  The argument is that software developers or miners should not be treated as brokers, the later being akin to ISPs. If you are not going to engage with this argument, why bother?
  - pembrook 5y ago
    Why argue against something that isn't actually in the legislation and is intended to scare people? Sure, if you bend over backwards and squint through one eye, you can contort yourself into the bad faith interpretation that developers will be treated as brokers--given they can engage in "transfers." But just because some entity can be considered to exist on the same "continuum" as crypto brokers, doesn't mean there isn't a clear division between them: https://rationalwiki.org/wiki/Continuum_fallacy https://rationalwiki.org/wiki/Continuum_fallacy One could also contort themselves into the assertion that convenience stores engage in transfers with "digital assets" (shifting credit via digitally created loans provided by Visa). Maybe I should publish an article saying this legislation will require 7-Eleven to report to the government every time you buy a twinkie? That'll really get some clicks!
heliodor 5y ago
If you're going to quote the article, please mark it as such.
shanebrunette 5y ago
Founder of cryptotaxcalculator.io here. First of all I agree the proposed rules aren’t particularly well thought out. The thing is, the 1099 forms that the IRS gets from existing brokers don’t make any sense because as soon as you move funds between exchanges the broker can no longer accurately track the cost basis. Pre-crypto you generally wouldn’t have this problem. From a tax compliance perspective it is an absolute nightmare, and I am sure this is just an ill thought out attempt at trying to make their lives easier. Probably not the best way to go about it though. There is a lot to solve in this space.
- dcolkitt 5y ago
  One of the underlying problems is that the capital gains tax code itself is designed for a world from a pre-financialized, pre-electronic world from the 1950s. The idea that someone might trade in and out of positions within milliseconds, possibly using complex derivatives or sophisticated leveraged is completely absent from the code. There's nothing in the code that addresses even how to treat trades that are done in the same day. Wash sale rules are literally non-determinable for high frequency traders. There's no guidance whatsoever on when and how derivatives are rolled against the a position in the underlying. I run a HFT operation, and just computing my US tax returns required thousands of lines of code of custom software. And then to actually file it, I print off a PDF, thousands of pages long of each and every individual trade. Not a CSV, not a data file, literally a printout. As if some IRS accountant is going to manually go through millions of rows line by line with an adding machine.
  - bequanna 5y ago
    Ha, I always wondered what HFT tax returns looked like. Of course, the IRS cannot and will not check every transaction. But I do wonder if they actually verify some subset of the reported transactions, or would this only happen in an audit?
    - dcolkitt 5y ago
      Luckily, never had to go through an audit yet. But spot checking a subset of transactions isn’t actually workable. Because of the wash sale rule, the adjusted basis on any single transaction is path dependent on both the previous and future trades in that symbol.
Spooky23 5y ago
The most booming business in crypto is the new category of organized crime. There are a lot of positive or interesting aspects to crypto, but the prevalence of tax evasion, money laundering and grifts of varying scale dominates the conversation. Regulation is inevitable.
throwaway0a5e 5y ago
>It is so far so vaguely worded (maybe deliberately?) that the government can target everyone in the ecosystem with penalties: That's the point. They reserve the power of arbitrary enforcement early on because they don't know what the stuff they won't like will look like. So then they'll go after anything they don't like and leave it up to the courts and the legislature to clean up the mess.
Rd6n6 5y ago
> include anyone who is “responsible for and regularly providing any service effectuating transfers of digital assets” Does that include PDFs, audio books, software, and photos? Web apps or plugins? “Asset” is monstrously vague. Does Drivethrurpg have to worry about this?
- meragrin_ 5y ago
  My first thought were in game assets.
knorker 5y ago
So in short you're saying that yes actually everyone has to follow AML and KYC laws. You can't just wave a magic "it's math!" wand and pretend that laws don't apply to you. Cryptocurrencies are not "clever" for avoiding laws.
- woah 5y ago
  Brokers have previously been parties that take custody of customer funds. This legislation potentially expands that to anyone who publishes code that users can use themselves to effect trades, for example, a startup that has deployed a smart contract. The willful stupidity that a lot of posters on here need to engage in to get some crypto bashing points is amazing. Ironically, this will not hurt crypto at all. It will only hurt US companies by driving them out. US residents will still be able to access and use smart contracts supplied by foreign startups unless the government makes crypto completely illegal.
  - knorker 5y ago
    Please take some time to read the hacker news community guidelines.
randomswede 5y ago
As far as I can tell[1], any miner that does NOT verify the identities of the source and destination of a bitcoin transaction, and these happen to involve illegal transactions, are guilty of money laundering under Swedish (and probably most countries') law. In that law, anyone who actively assists in the transference of valuable tokens need to ensure that they're not assisting in the transfer of value that originates from crime. And since a miner has explicit choice of what transactions to include in the block, this means that they cannot hide behind a "common carrier"-like[2] exception. [1] Nope, don't even pretend to be a lawyer in secret, and I may have missed some subtleties. [2] This is basically what protects the inter-bank transfer services, the banks themselves are on the hook for preventing money laundering transactions to get that far. But since anyone can place a transaction into the pool, this is not applicable.
LightG 5y ago
It's crypto-huntin' season
kybernetyk 5y ago
> regularly providing any service effectuating transfers of digital assets so running your own bitcoin node lands you with one foot in jail

hkt 5y ago

"forced to surveil their users" Or as it is otherwise known, abide by the same KYC rules as banks. I'd guess the vague wording is to allow regulators and the judiciary to respond flexibly to changing practices. It might be broad but it isn't poor lawmaking: it does exactly as it intends to. Even using brokerage as an analogy makes sense to respond to a system in which by design almost everyone of significance is a middleman of some kind. Fundamentally this is what will allow bitcoin to thrive: this is part of the process of becoming legitimised. It isn't what the crypto-libertarians hoped for, but what they hoped for in the beginning was endless deflation, untaxable income and speculative gains. It wasn't good for anyone but them. This is a step to something better, namely a new financial system in which upstarts are able to enter quickly and on technical merit alone. That is worth a lot, and won't happen without bitcoin entering the regulated mainstream.

KingOfCoders 5y ago
It's basically the same with the GDPR, it talks more about principles than companies or technologies to be able to adapt to a fast changing field - which I appreciate as a citizen but as an implementor I prefer the checklists of PCIDSS which are not vague.
mattwilsonn888 5y ago
Bitcoin already is regulated - piling on as much regulation as possible isn't what's going to make it more main stream. This bill allows the request to treat miners as brokers, which is absurd considering that not all miners operate in the U.S. Any miner that does operate in the U.S. will hash locally and send verified blocks from international nodes, so it won't work anyways. Upstarts are able to enter quickly based on technical merit alone RIGHT NOW. How does adding regulation simplify that for them? It doesn't - it makes it far more restrictive. You must be on crack to believe these provisions "help" crypto assets. This bill goes against the design philosophy of peer-to-peer transactions.
- hkt 5y ago
  > This bill goes against the design philosophy of peer-to-peer transactions. Yes: because that design philosophy is counter to that of consumer friendly, regulated markets. What will make bitcoin mass market is the ability of regular investors to get involved with the kind of safety net regulations require. The alternative being that bitcoin maintains its already shady reputation as something for money laundering and buying drugs (crack, perhaps?) online. Cleaning up that reputation and its causes is the job of regulation, and it will work.
  - jkepler 5y ago
    However, a far larger portion of illicit drug transactions are for cash dollars than for bitcoin; estimates are 2-5% illicit transactions globally in fiat currencies, and about 0.34% illicit in bitcoin in 2020 (a rate that's fallen significantly since 2019 as we see more mainstream early adoption if bitcoin [1]. This proposed regulation doesn't address the problems you evoke, and its an attack on fundamental human rights such as privacy. [1] https://www.forbes.com/sites/haileylennon/2021/01/19/the-false-narrative-of-bitcoins-role-in-illicit-activity/ https://www.forbes.com/sites/haileylennon/2021/01/19/the-fal...
    - cinquemb 5y ago
      > However, a far larger portion of illicit drug transactions are for cash dollars than for bitcoin The regulatory system, and people who are ok with deferring to it in its existing incarnation (i.e. the revolving door between people within TBTF bailouts-every-day with "open" "market" operations banks [where these cash dollars inevitably end up] and the people who "look" after them system), are fine with this because slaps on the wrists and fines are considered the cost of doing business and there can't be anyway possible to live and exchange value without them being involved under the guise of "protection" or "else" racket. Robin Hanson would probably call this phenomenon a form of "Elite Tax" on society. [0] [0] https://www.overcomingbias.com/2021/08/how-high-our-elite-tax.html https://www.overcomingbias.com/2021/08/how-high-our-elite-ta...
noduerme 5y ago
How can anyone enter the market quickly with an app that takes crypto as payment, if you have to register as a broker and meet KYC standards? Suppose you want to sell character costumes or start a subscription podcast in crypto, rather than paying royalties to Apple or having payment processing through Visa. Are you going to demand ID verification from all your listeners? It basically makes it so onerous to a startup that no innovation can happen
- trasz 5y ago
  Can you give example of a cryptocurrency startup which innovated anything useful?
  - astoor 5y ago
    > Can you give example of a cryptocurrency startup which innovated anything useful? This is a trap I've seen many technical folks on HN fall into - they define "useful" along the lines of "beneficial", or "productive", or "worthwhile", rather than simply "is used". Think of casino tokens. They have no intrinsic value, and can only be used within very limited set of environments, so you could think of them as useless in the strict sense. But that doesn't stop large numbers of people using large numbers of them on a regular basis, and the operators make hundreds of billions a year from the people using them, so they are "useful" in the sense of "being used" to serve a strong human desire (just not to make the world a better place).
    - trasz 5y ago
      As opposed to defining “useful” along the lines of “generating profit”. So, sure, cryptocurrency startups can innovate a new way of making money. But it doesn’t make them useful. One could argue it doesn’t even make them not harmful.
      - astoor 5y ago
        I would also prefer "useful", as in "capable of being put to use", to apply to uses with net positive outcomes for society - I was just trying to make the point that, unfortunately, many others don't.
RHSeeger 5y ago
The fact that the government routinely threatens to "throw the book" at people, using various "vaguely worded" laws, to get them to plead guilty to crimes they may or may not have committed (without their time in court) is a prime reason why those laws are bad. > We believe you had drugs on you, even though we couldn't find them. We also see you play World of Warcraft and that you're used the in game auction house to sell your items for in game money to other players. If you don't please guilty to the drug charge, we're going to hit you with 1,000+ counts of of violations of the IBCSP (or whatever this law is called); you'd be looking at 1,000 years in prison and a 1,000,0000$ fine, minimum. The US government _does_ things like that. And, as such (because they have shown they cannot be trusted to act in the spirit of the law), we need to limit what powers we give them. I find it astonishing that anyone doesn't realize this.

colechristensen 5y ago

Is it really a privacy disaster? Blockchain is already a privacy disaster as all of your transactions are on a public ledger. It just puts a nail in the coffin of the idea that blockchain is going to be some libertarian dream of freedom from regulation and a magic bullet for getting around rules. Of course this was coming.

christophilus 5y ago

> responsible for and regularly providing any service effectuating transfers of digital assets Do they define digital assets? Because my Google Doc is a digital asset. If I transfer it to a friend, is Google now a broker?

deleted 5y ago
[deleted]
Communitivity 5y ago
I would suspect that under the current proposed wording, yes. Facebook, Google, etc. all become brokers. This could be a means for the government to go after social platforms and get transparent vies on all the social media activities of U.S. citizens. It is scary.

pjc50 5y ago

This should be read along with https://news.ycombinator.com/item?id=28042185 https://news.ycombinator.com/item?id=28042185 "Wealthy Americans Targeted by U.S. in Panama Tax-Fraud Probe". The fundamental question is "should paying tax be optional for rich people?" Large parts of the crypto ecosystem believe that the answer should be "yes". The US government believes the answer should be "no".

genocidicbunny 5y ago
Not only should 'paying tax be optional for rich people' be illegal, it should be heavily punished. If you are rich, and you avoid taxes, you should be punished extremely harshly, to the point of poverty or termination.
- lifty 5y ago
  When the rules make it illegal to not pay tax then rich people will pay tax. The rules are made in such way that people can avoid paying tax, legally. So you should call your representative and make it clear that you want it, but I doubt they will listen to you.
  - Retric 5y ago
    A great deal of tax avoidance strategies used by the rich are illegal, but the IRS either doesn’t notice or frequently chooses not to prosecute them. A recent great example of why they don’t notice. Rich individual 1 was paying for an employee’s children/grandchildren to go to school while deducting that money from his salary via a second set of books. Rich individual avoids payroll tax, employee avoids income tax, and on the surface it looks legal except the second set of books made it a clearly illegal action. It’s exactly that mix of personal and business activities that makes such criminal evasion so hard to track. Another interesting example of not prosecuting, personal Roth IRA’s may not invest in companies under specific conditions and transactions must be at the fair market rate. Rich individual 2 broke both rules, but the IRS investigation decided to leave it alone. This is adding up to hundreds of millions of dollars in tax fraud, but if the IRS chooses not to prosecute then he’s free and clear. PS: Names redacted to avoid political discussion.

pembrook 5y ago

> regularly providing any service effectuating transfers of digital assets I fail to see how this is a "privacy disaster." It looks like crypto brokers are going to be treated like all other brokerages. Do you also call it a "privacy disaster" when your bank account requires your name and address so they can report interest payments to the government? Or when Robinhood/Schwab/Vanguard/Etc send the IRS a list of all your stock transactions for the year in a form 1099? Bitcoin is basically digital gold, and just like with gold, when you chose to buy or sell it the convenient way (eg. through an ETF instead of actual physical gold), it gets reported to everybody. You can always custody your own bitcoin and find partners to transact with directly and choose not to report it (like with physical gold), but, similar to physical gold, it will be extremely cumbersome, risky, and not worth your time to do so.

bgitarts 5y ago
Yes I call it a "privacy disaster" when your bank account requires your name and address so they can report interest payments to the government. Or when Robinhood/Schwab/Vanguard/Etc send the IRS a list of all your stock transactions for the year in a form 1099.
miracle2k 5y ago
The argument is that software developers or miners should not be treated as brokers, the later being akin to ISPs. If you are not going to engage with this argument, why bother?
- pembrook 5y ago
  Why argue against something that isn't actually in the legislation and is intended to scare people? Sure, if you bend over backwards and squint through one eye, you can contort yourself into the bad faith interpretation that developers will be treated as brokers--given they can engage in "transfers." But just because some entity can be considered to exist on the same "continuum" as crypto brokers, doesn't mean there isn't a clear division between them: https://rationalwiki.org/wiki/Continuum_fallacy https://rationalwiki.org/wiki/Continuum_fallacy One could also contort themselves into the assertion that convenience stores engage in transfers with "digital assets" (shifting credit via digitally created loans provided by Visa). Maybe I should publish an article saying this legislation will require 7-Eleven to report to the government every time you buy a twinkie? That'll really get some clicks!

heliodor 5y ago

If you're going to quote the article, please mark it as such.

shanebrunette 5y ago

Founder of cryptotaxcalculator.io here. First of all I agree the proposed rules aren’t particularly well thought out. The thing is, the 1099 forms that the IRS gets from existing brokers don’t make any sense because as soon as you move funds between exchanges the broker can no longer accurately track the cost basis. Pre-crypto you generally wouldn’t have this problem. From a tax compliance perspective it is an absolute nightmare, and I am sure this is just an ill thought out attempt at trying to make their lives easier. Probably not the best way to go about it though. There is a lot to solve in this space.

dcolkitt 5y ago
One of the underlying problems is that the capital gains tax code itself is designed for a world from a pre-financialized, pre-electronic world from the 1950s. The idea that someone might trade in and out of positions within milliseconds, possibly using complex derivatives or sophisticated leveraged is completely absent from the code. There's nothing in the code that addresses even how to treat trades that are done in the same day. Wash sale rules are literally non-determinable for high frequency traders. There's no guidance whatsoever on when and how derivatives are rolled against the a position in the underlying. I run a HFT operation, and just computing my US tax returns required thousands of lines of code of custom software. And then to actually file it, I print off a PDF, thousands of pages long of each and every individual trade. Not a CSV, not a data file, literally a printout. As if some IRS accountant is going to manually go through millions of rows line by line with an adding machine.
- bequanna 5y ago
  Ha, I always wondered what HFT tax returns looked like. Of course, the IRS cannot and will not check every transaction. But I do wonder if they actually verify some subset of the reported transactions, or would this only happen in an audit?
  - dcolkitt 5y ago
    Luckily, never had to go through an audit yet. But spot checking a subset of transactions isn’t actually workable. Because of the wash sale rule, the adjusted basis on any single transaction is path dependent on both the previous and future trades in that symbol.

Spooky23 5y ago

The most booming business in crypto is the new category of organized crime. There are a lot of positive or interesting aspects to crypto, but the prevalence of tax evasion, money laundering and grifts of varying scale dominates the conversation. Regulation is inevitable.

throwaway0a5e 5y ago

>It is so far so vaguely worded (maybe deliberately?) that the government can target everyone in the ecosystem with penalties: That's the point. They reserve the power of arbitrary enforcement early on because they don't know what the stuff they won't like will look like. So then they'll go after anything they don't like and leave it up to the courts and the legislature to clean up the mess.

Rd6n6 5y ago

> include anyone who is “responsible for and regularly providing any service effectuating transfers of digital assets” Does that include PDFs, audio books, software, and photos? Web apps or plugins? “Asset” is monstrously vague. Does Drivethrurpg have to worry about this?

meragrin_ 5y ago
My first thought were in game assets.

knorker 5y ago

So in short you're saying that yes actually everyone has to follow AML and KYC laws. You can't just wave a magic "it's math!" wand and pretend that laws don't apply to you. Cryptocurrencies are not "clever" for avoiding laws.

woah 5y ago
Brokers have previously been parties that take custody of customer funds. This legislation potentially expands that to anyone who publishes code that users can use themselves to effect trades, for example, a startup that has deployed a smart contract. The willful stupidity that a lot of posters on here need to engage in to get some crypto bashing points is amazing. Ironically, this will not hurt crypto at all. It will only hurt US companies by driving them out. US residents will still be able to access and use smart contracts supplied by foreign startups unless the government makes crypto completely illegal.
- knorker 5y ago
  Please take some time to read the hacker news community guidelines.

randomswede 5y ago

As far as I can tell[1], any miner that does NOT verify the identities of the source and destination of a bitcoin transaction, and these happen to involve illegal transactions, are guilty of money laundering under Swedish (and probably most countries') law. In that law, anyone who actively assists in the transference of valuable tokens need to ensure that they're not assisting in the transfer of value that originates from crime. And since a miner has explicit choice of what transactions to include in the block, this means that they cannot hide behind a "common carrier"-like[2] exception. [1] Nope, don't even pretend to be a lawyer in secret, and I may have missed some subtleties. [2] This is basically what protects the inter-bank transfer services, the banks themselves are on the hook for preventing money laundering transactions to get that far. But since anyone can place a transaction into the pool, this is not applicable.

LightG 5y ago

It's crypto-huntin' season

kybernetyk 5y ago

> regularly providing any service effectuating transfers of digital assets so running your own bitcoin node lands you with one foot in jail