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.
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:
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.
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.
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.