Call Now (800) 681-1295
Close

Emerging Regulations Create Tax Law Framework for Bitcoin and Other Cryptocurrencies

Table of Contents

    With cryptocurrencies and other blockchain currencies becoming more and more popular, the amount of money that goes into these currencies grows each day. This also means that more and more currencies are becoming problems for security breach, money laundering, banking privacy, and other securities regulations. Recent documents released this summer by the Securities Exchange Commission (SEC) and other US regulatory agencies have thrown new light on how Bitcoin and other coin and blockchain currencies will be regulated going forward.

    If you need tax advice or criminal tax defense representation related to cryptocurrency, contact the Tax Law Offices of David W. Klasing today. Our Orange County attorneys, CPAs, and other financial professionals have the necessary experience. For a reduced rate initial consultation, contact our office at 800-681-1295 or book online today.

    How the SEC Regulates Cryptocurrency

    Most cryptocurrencies function based on a system of mining which involves third party’s building a piece of code, and expending resources to create that code, the end result is the creation of a new “coin”. As the code changes hands, calculations are performed to ensure the transfer was correct and appropriate, and to add new blockchains to the code. The Securities and Exchange Commission (SEC) decided in July that these coins, like stocks, are covered under their rules and regulations.

    This means that sale, transfer, and conversion of cryptocurrency coins may be held to the same standards as other securities and stocks, which the SEC oversees. This means that coin offerings must now be registered with the SEC, or else they could violate federal regulations.

    At the same time, it is unclear if this position of the SEC will be strictly enforced. The SEC stated that the “Distributed Anonymous Organization,” which held its coin offering in July, may have violated SEC regulations in doing so. At the same time, it does not appear that they are doing anything to enforce future compliance or punish the organization for noncompliance.

    Ultimately, going forward, this means that the SEC will regulate crypto coin offerings in some of the following ways:

    • The SEC may require registering coin sales as the sale or exchange of securities.
    • All tokens may have to be registered and follow SEC regulation unless they fall into an exemption.
    • Crowdfunding regulations must be followed for crowdfunded coins.
    • The professionals and investment managers that deal in cryptocurrency must be appropriately registered or licensed.

    Failing to follow SEC regulations could put you at risk of regulatory enforcement, resulting in penalties or effectively preventing additional transactions. In worse case scenarios, purposely failing to follow SEC regulations could be charged criminally.

    Taxing Cryptocurrency

    The IRS (Internal Revenue Service) has been slowly catching up with the new technology of blockchain cryptocurrency and how to tax it. In general, the IRS has been hesitant to offer detailed guidance for cryptocurrency investors, preferring instead to selectively enforce abusive actors.

    It is unpredictable how the IRS will respond as the demand for cryptocurrency grows and trading and holding cryptocurrency becomes more akin to the popularity of owning stock. There have already been steps in Congress to adjust how the IRS handles coins. Recently, a bill was proposed in the House of Representatives to create tax exemptions for cryptocurrency transactions under $600. While this may create wider freedom for many transactions, it may also create problems with disclosures or structuring transactions to avoid disclosure requirements.

    Orange County Tax Attorneys

    If you need advice on how to report your cryptocurrency transactions, what regulations apply, and how your coins will be taxed, talk to our experienced tax professionals and Orange County Tax Attorneys at the Tax Law Offices of David W. Klasing today. For a reduced-rate consultation with our tax and Tax Crime Defense Attorneys, call 800-681-1295 or schedule online today.

    Tax Help Videos

    Representing Clients from U.S. and International Locations Regarding Federal and California Tax Issues

    tax lawyers

    Main Office

    Orange County
    2601 Main St. Penthouse Suite
    Irvine, CA 92614
    (949) 681-3502

    Our headquarters is located in Irvine, CA. Our beautiful 19,700 office space is staffed full-time and always available for our clients to meet with our highly qualified and experienced staff of Attorneys, Certified Public Accountants and Enrolled Agents. We also offer virtual consultations and can travel to meet with clients in one of our satellite offices.

    Outside of our 4 hour initial consultation option, we do not charge travel time or travel expenses when traveling to one of our Satellite offices, or surrounding business districts, where it is necessary to meet personally with taxing authority personnel, make court appearances, or any in person meeting deemed necessary for the effective representation of a client. To make this as flexible, efficient, and convenient as possible, David W. Klasing is an Instrument Rated Private Pilot and Utilizes the Firms Cirrus SR22 to service client’s in California and in the Southwest by air. Offices outside these areas are serviced via commercial jet airlines. None of these costs are charged to our clients.

    Satellite Offices

    California
    (310) 492-5583
    (760) 338-7035
    (916) 290-6625
    (415) 287-6568
    (909) 991-7557
    (619) 780-2538
    (661) 432-1480
    (818) 935-6098
    (805) 200-4053
    (510) 764-1020
    (408) 643-0573
    (760) 338-7035
    Arizona
    (602) 975-0296
    New Mexico
    (505) 206-5308
    New York
    (332) 224-8515
    Texas
    (512) 828-6646
    Washington, DC
    (202) 918-9329
    Nevada
    (702) 997-6465
    Florida
    (786) 999-8406
    Utah
    (385) 501-5934