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United States Bitcoin Government

US Treasury Calls For Stricter Cryptocurrency Compliance With IRS, Says They Pose Tax-Evasion Risk (cnbc.com) 125

Posted by msmash from the how-about-that dept.
The Treasury Department on Thursday announced that it is taking steps to crack down on cryptocurrency markets and transactions, and said it will require any transfer worth $10,000 or more to be reported to the Internal Revenue Service. From a report: "Cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly including tax evasion," the Treasury Department said in a release. "This is why the President's proposal includes additional resources for the IRS to address the growth of cryptoassets," the department added.

"Within the context of the new financial account reporting regime, cryptocurrencies and cryptoasset exchange accounts and payment service accounts that accept cryptocurrencies would be covered. Further, as with cash transactions, businesses that receive cryptoassets with a fair market value of more than $10,000 would also be reported on." Bitcoin traded off its highs for the day on the Treasury headlines and was last up just 1%, according to Coin Metrics. Previously in the session, it was up more than 9%. A growing number of Wall Street analysts have over the past month sounded the alarm that regulators at Treasury and the Securities and Exchange Commission could soon take a more active role in cryptocurrency regulation.
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US Treasury Calls For Stricter Cryptocurrency Compliance With IRS, Says They Pose Tax-Evasion Risk More

US Treasury Calls For Stricter Cryptocurrency Compliance With IRS, Says They Pose Tax-Evasion Risk

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  • That's actually good news for bitcoin (Score:5, Insightful)

    by Ecuador ( 740021 ) on Thursday May 20, 2021 @11:57AM (#61404262) Homepage

    That's actually good news for bitcoin, as it indicates the current mentality of the government is to make sure it is taxed. Which means they are not considering to ban it yet like China.
    Given that bitcoin is probably better described as a crime against humanity IMHO, I find it a bit surprising that it's still going strong, but that's just me...

    • Re: (Score:2, Insightful)

      by Anonymous Coward

      greed always prevails over good

    • Re: (Score:2)

      by lsllll ( 830002 )

      bitcoin is probably better described as a crime against humanity IMHO

      Curious about your formed opinion. Is it because of the inefficiency and design (and electrical usage for handling and mining) of bitcoin? Or do you believe digital currencies altogether are crimes against humanity?

      • Re: (Score:2, Informative)

        by iggymanz ( 596061 )

        Digital crypto "currencies" aren't money, not even currency.

        Meanwhile, the dollar has been mostly digital for decades, most money isn't physical.

        • All currency is an illusion, Bitcoin doubly so

          • No, the word has a definition and US dollar meets it. Bitcoin and similar do not, and they fail the tests of being money.

      • I thought it would be clear. It is the specific implementation that uses stupid amounts of energy, offering very little in return if you use it for transactions. It goes against the spirit of every climate legislation, hence why I am surprised it is still legal.
        I would of course be in favor of an efficient decentralized digital transaction system.

      • Re: (Score:3, Interesting)

        by ceoyoyo ( 59147 )

        Not the original poster, but the extreme inefficiency is certainly reasonable to consider a crime against humanity. There's also the potential to disrupt economies. Bitcoin promoters advertise its deflationary nature as a feature, but that's not really something you want in a currency, especially not *the* currency. For all the criticism of modern economic and monetary policy, it's provided unprecedented stability and prosperity.

    • Well the good news is that making it taxable and putting know-your-customer rules in place will basically kill the only advantage it has over any other payment systems, and thus remove any non-hobbyist incentive to use it. That would be a sane thing for a government to do, no sense having a giant spiderweb of tax laws and anti-money-laundering laws in place, and then a cryptocurrency loophole right next to it big enough to drive a North Korean ICBM launcher through sideways.

      • Re:That's actually good news for bitcoin (Score:4, Interesting)

        by DarkOx ( 621550 ) on Thursday May 20, 2021 @12:38PM (#61404438) Journal

        Right bitcoin is a total failure once you apply ordinary banking regulations to it; which if you accept there are any validity to those they should logically apply to bitcoin as well.

        So what you are left with is an alternative currency that is far slower or more expensive to transact than the existing dollar infrastructure. The dollar infrastructure is OLD and there is a lot of technical modernization that could be done to reduce costs and speed up settlements going forward; bitcoin on the other hand, nope, to many players who are not beholden to any central authority, which in this case inst a feature it means the system can't evolve.

        crypto currency may or may not have a feature but bitcoin is truly a SHITcoin. The only thing it has is first mover advantage, THE ONLY THING

        • Re:That's actually good news for bitcoin (Score:5, Insightful)

          by jythie ( 914043 ) on Thursday May 20, 2021 @02:11PM (#61404740)
          Yeah,but BTC has one huge advantage dollars do not... the ability to get rich quick without doing anything productive and lord it over people who work for a living. BTC gives you the emotional high of 'being right' in a way that dollars can not, and that is worth more to its proponents than anything.

          • Yeah,but BTC has one huge advantage dollars do not... the ability to get rich quick without doing anything productive and lord it over people who work for a living. BTC gives you the emotional high of 'being right' in a way that dollars can not, and that is worth more to its proponents than anything.

            I haven't noticed any lack of that behavior in people who got rich with dollars.

    • Re: (Score:3)

      by jwhyche ( 6192 )

      Not so. They maybe just being smarter than the Chinese. Tax it, then ban it.

    • Re: (Score:3)

      by gweihir ( 88907 )

      That's actually good news for bitcoin, as it indicates the current mentality of the government is to make sure it is taxed. Which means they are not considering to ban it yet like China.
      Given that bitcoin is probably better described as a crime against humanity IMHO, I find it a bit surprising that it's still going strong, but that's just me...

      Greed, stupidity and lack of understanding. Admittedly, this Ponzi-scheme is much more sophisticated than usual, but that does not change its nature.

    • Being taxed is not a good thing, I don’t know how this was marked insightful

  • By what mechanism will compliance be verified and by what mechanism will it be enforced?

    A law or a regulation is just words on paper without the physical force of the state to back them up and eyes on the target to direct that force.

    Encrypted bits out in the aether don't lend themselves very easily to the latter.

    If the penalties are more than just a slap, then all this will do is drive it more underground than it is now. Which isn't to say it's exactly on the up and up right now.

    • Forensic accounting is theoretically possible on cryptocurrency networks, at least with Bitcoin. But I imagine the tools and skills to actually do it will be pretty specialized and costly.

      As always, the first step is to make the laws. Only then can you enforce them, let's not put the cart before the horse. Most of the time "unenforceable" laws end up in that category because of courts placing limitations on the laws rather than because investigators lack the ability to investigate.

      Practically speaking I sus

      • The tools are costly, but there is a high demand for them. Every LEO and government wants a way to glean insights into BTC's blockchain and be able to find the party that owns wallets. It is only a matter of time before trying to be anonymous with Bitcoin transactions is as fruitless as trying to make a bogus PayPal account to send/receive cash.

        Of course, there are other cryptocurrencies out there with anonymous potential, but it is a tough battle. Ring signatures can be gotten around by finding the comm

    • Re:Lawyers think like lawyers (Score:5, Interesting)

      by mamba-mamba ( 445365 ) on Thursday May 20, 2021 @12:18PM (#61404324)

      Well, it will be enforced at the exchanges. Coinbase and Paypal will be required to collect tax ID information from people who buy or sell bitcoin and report it to the IRS. Companies that accept bitcoin will clear transactions through coinbase or paypal or similar, or register themselves as exchanges and collect the tax ID directly.

      The black market may still transact in bitcoin without telling the IRS. But it will be very difficult to do anything legitimate without the IRS knowing about it.

      Personally, I would not consider buying and selling bitcoin or another cryptocurrency without reporting it, because it is much worse for you if you don't report it and they find out.

      Keep in mind that the blockchain records every transaction that has ever been made in bitcoin. It is only anonymous because there is no association between addresses and people. But over time, the identities of addresses sometimes become known. Over time, many transactions from the bitcoin blockchain will become de-anonymized. So there is no point, really, where you are safe if you are dealing in bitcoin without telling the IRS (assuming you are subject to US tax law).

      I am curious about the miners, though. Since they didn't buy bitcoin, but acquired it by mining, what is their intial cost basis? Maybe the IRS will decide the cost basis is zero and the entire value is subject to capital gains tax. Or, maybe they will allow you to use equipment and electrical costs to determine the cost basis. Interesting tax question.

      • Re: (Score:3)

        by PPH ( 736903 )

        what is their intial cost basis?

        Their power bill? If they had the foresight to meter their mining machine and keep records.

        • Yeah that is what I am thinking. But I am not a tax person. Maybe the only way to do it (or the way someone SHOULD have done it) is to start a mining business. Then power could be written off as a business expense (along with other expenses and depreciation of mining hardware, etc). Then you sell the bitcoin for a profit as soon as it is mined, and that profit would be taxed as a business profit instead of a capital gain.

          If you wanted to HODL you could just have the business sell the bitcoin to yourself, th

          • Re: (Score:3)

            by PPH ( 736903 )

            start a mining business

            Offshore investment company. I've got dibs on Bermuda Shorts LLC.

      • It is already being enforced at the exchanges. Virtually every exchange out there has KYC/AML measures in place, so adding reporting to the IRS, if it isn't there already, is just part of what a financial institution does. A cryptocurrency is worthless unless one can exchange it for material goods, and having the gateways guarded pretty much ensures the IRS will get their cut, or at least know who to slap the handcuffs on.

        Having a ton of cryptocurrency is one thing. Being able to cash out and convert the

        • Re: (Score:2)

          by Rinikusu ( 28164 )

          In fact, the exchanges keep a good record of every transaction you make and you can download it in various formats (csv, excel). I don't know if they have it yet, but eventually they might join etrade and the like and have it automatically imported into turbotax and similar eventually.

          And yes, every crypto account I've opened has required some form of KYC validation. I primarily use Coinbase and Binance.US and I'm perfectly fine with reporting my earnings/losses.

      • Re: Miners.... Pretty simple, like any other business, the value attained from mining the coin minus the cost of mining the coin (i.e. computer equipment / asset depreciation, electricity, man hours) equals revenue, that revenue is taxable.

        I agree with you, the wild west days of crypt currencies are drawing to an end. People better start playing by the rules or they can expect to be prosecuted in the future for tax evasion / money laundering.

    • By what mechanism will compliance be verified and by what mechanism will it be enforced?

      We're talking about the US here right?

      Guns, the answer is guns.

    • Re: (Score:2)

      by mark-t ( 151149 )
      I imagine that it would require that companies within the country that exchange cryptocurrency must be able to associate any cryptocurrent transfer to a social security number, and submit tax records for transactions >= $10K. If they are discovered to be exchanging bitcoin without such tracking, then they could be fined, and the company's license to operate within the country at all could be suspended if they do not bring themselves into compliance within a certain time window.

    • Re: (Score:1)

      by Anonymous Coward

      By what mechanism will compliance be verified and by what mechanism will it be enforced?

      By this one [xkcd.com].

      Those that are involved in illegal activities typically do so with the permission (and payment to) local organized crime. Eventually, if they cross the mob or just want out, they come to find that the penalty for doing so can be quite severe. The Russian mob likes to use gardening shears to cut body parts off. Eventually, those that do want out turn states evidence and go into witness protection. After they have turned their little black books over to the authorities with anonymous account numb

    • Re: (Score:3)

      by SirSlud ( 67381 )

      There are lots of things you can do that you can get away with. A great deal of people don't do things simply because it's against the law.

      I know this concept blows some peoples minds, but just because laws and regulations may not reach 100% compliance or enforced doesn't make them useless or detrimental.

    • Of all the things nation-states enforce, it will be taxes. Richer people may get a finger waggle, but there will be others who get hauled off and locked up for a long time, just to be made examples of.

      Enforcing taxes on Bitcoin can be done. Between info that the blockchain provides, tracing users via IPs, and other data that is given out (analytics by wallet apps), it wouldn't be hard for an enforcement agency to build a case against someone, and have pretty much 100% proof of tax evasion. Yes, BTC walle

    • The IRS will apply current tax laws to crypto in the same way they do to credit cards and bank account transfers. It's not all THAT different. Assets are assets. Investments are investments. Income is income. And they will pull it off. You think the CIA and FBI are fearsome? They pale in comparison to the IRS. You do NOT cross them. They will pursue you forever. They are patient. They are willing to wait decades. You cannot escape them. They WILL get their money.

      If it happens, it will certainly drive c

      • There is always blowback. It is a good thing in some ways, but my fear is that it will drive newer advances and cryptocurrencies that can keep the IRS at bay, similar to how blacklists caused spammers to go from their own IP blocks to decentralized stuff, to going after compromised accounts, and has become a whack-a-mole effort.

        Right now, we have cryptocurrencies mainly designed for pump and dump, perhaps with some anonymous features thrown in. If people started really worrying about governments, I wouldn

        • This would fix itself. If someone develops a true "crime crypto", no banks will link to it, no stores will accept it, and anyone using it will have a massive target painted on their back. It would probably be straight-up-illegal in the civilized world. It would be unreliable, even more prone to theft than current crypto exchanges, and quite a few other problems as well. Making it mostly useless. Current crypto is only useful to criminals because it isn't attracting all THAT much attention and they can layer

          • Pretty much the adage, "there is no honor among thieves" comes into play here.

            You have me wondering about a cryptocurrency, with multiple anonymous mechanisms, and perhaps multiple ways to mine it, be it proof of storage (like Chia), proof of network (like Helium), or proof of work (like most everything out there.) Call it CrimeCoin. Of course, no official place would accept it, but if people think it is cool enough to mine, then it will end up with some value, even if the only exchanges into and out of i

            • Perhaps you have more understanding of crypto than me, but my understanding is that the whole system requires asymmetric computational complexity plus massive network effects in order to make it work. If criminals move to a peer-to-peer model in order to evade detection, any network effects go out the window. No more "18 million computers worldwide voting constantly to keep the blockchain intact" any more. Actually, could any sort of blockchain at all be maintained in a peer-to-peer system?

              I'm over my

  • Mandatory Reading... (Score:3)

    by garyisabusyguy ( 732330 ) on Thursday May 20, 2021 @12:07PM (#61404298)

    The Great Simoleon Caper [electricinca.com]

  • Easy to track (Score:5, Insightful)

    by GlobalEcho ( 26240 ) on Thursday May 20, 2021 @12:15PM (#61404314)

    I boggles the mind that so many people considered BitCoin difficult to track back in the early days. The database is completely public, unlike retailers' receipts, brokerage transaction histories, or consulting accounts. It's not fragmented like real estate and automobile transactions.

    Sure a wallet is initially just a number, but its interactions with other wallets, and their historical and future interactions with other parts of the economy, make it quite identifiable. Certainly so when an entity with subpoena power bothers to make an effort.

    From my point of view, that is all to the good. I hate the waste in mining and really want to see a US FedCoin take off. I also want my fellow citizens to pay their damn taxes -- if they want to save money on taxes they are welcome to write letters to their representatives, and hope legislation goes their way.

    • I hear people say this, but then I read that the Colonial Pipeline ransom was paid in bitcoin (75 bitcoin to be exact.) Why did the blackmailers demand payment in bitcoin if it's the most public of means to receive funds? I'm sure they funneled it through something, fine, then why is bitcoin better for that than funneling payment in US dollars through something?

      • Re: (Score:2)

        by jpapon ( 1877296 )
        Because there are ways to wash bitcoin, for example, through pools. That wouldn't help you though if you ever want to convert your bitcoin to something tangible inside the US, like a physical asset or dollars. The IRS will still be able to see that you have a large amount of bitcoin and will want to know how you acquired it... "from a dark pool" is not a good answer.

        If you're buying something in Russia, that's less of a concern... as long as you pay your Russian taxes, you're probably fine.

      • I am sure there will continue to be black market bitcoin transactions, even in the US. But keep in mind that the blackmailers may not be subject to US jurisdiction. So they may be able to spend the coin or exchange it for some non US currency in some fashion and never get caught. Or, maybe, as I suspect, they have already been contacted by persons affiliated with the US government, in an unofficial way. That will never be reported in the news. Anyway, there are things people can do to make bitcoin difficult

    • You can "launder" your crypto currency by transferring it to a cryto-exchange "hot-wallet", then to another wallet. From the outside, all you see is wallet1 to cryto-exchange-wallet. then crypto-exchange-wallet to wallet2. But since all the crypto is fungible, there is no way to prove or track the coins from wallet1 made to wallet2.

      It could be anyone who has an account with the crypto-exchange transferring coins to wallet2, there is no way to find out unless you can peer inside the crypto-exchange internal

  • The Man!

  • I think the IRS is barking up the wrong tree with this one. There are thousands of perfectly legal (and not quite legal) tax dodges being used right now, as detailed in the Panama Papers. In the amounts of trillions.

    The only reason why these moves are legal is because the legislature is bought and paid for by those who are using these methods. IOW the game is rigged from top to bottom.

    • Re: (Score:2)

      by DarkOx ( 621550 )

      as detailed in the Panama Papers

      That is the operative thing there.

      Tax doges that are 'perfectly legal' are not the IRS problem, they are CONgress's problem to fix.

      Which brings us to the 'not quite legal' those are used be monies interests who happen to also usually be major political contributors. We can have a whole separate discussion as to if on balance the IRS favors the DNC or the GOP but one thing is for sure they are not a-political. They don't really want to create problems for any 'personal friends' of any powerful Congress Critt

      • There is some good news on that front with Biden announcing today a plan to double the IRS workforce and focus on tax dodging.

        Biden proposes doubling IRS workforce as part of plan to snag tax cheats [politico.com]

        At the same time, the administration wants to require financial institutions and other businesses to report a lot more information about the money coursing through their customers’ accounts — a proposal designed to put the fear of the IRS in the hearts of tax scofflaws.

        It’s part of a concerted e

  • Ok, so now they are a legitimate tool of the 1%!

  • For the top 1% of the top 1% maybe. For everyone else? Those at the top think the rest of us are suckers. Investing ins something as volatile as Crypto's is for most of us, a mug's game. AFAIK, it is just the most recent Ponzi scheme intended to make the rich richer.

  • The government hasn't shown me to be trustworthy. I doubt it ever will

  • Tax evasion, money laundering, and sale of illegal goods (i.e., paying off extortionists). Oh, and scams^X investments that cause lots of unsophisticated people to lose what little they already have.

  • I'm expecting a energy use tax for each new Bitcoin.

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