Cryptocurrency

[9 Nines]

Technically, I think if your vacationing in a foreign country, you are causing tax events as you spend a foreign currency there but it is not really practical to report it.   This is the same if you live in jurisdiction with a sales tax.  Technically, you should pay sales tax when you buy an item anywhere, not just in that jurisdiction.   While most do not do it, your county tax accessor likely has a means to report purchases, in non sales tax jurisdiction if you live in one that has sales tax.

 In fact, some entities actively pursue it.  For example, the State of New York often goes to New Jersey malls during holiday/high retail activity times, to take pictures of New York license plates at New Jersey malls. The owners of those vehicles are sent a New York sales tax bill.  The State legislated an average spending amount for that situation and the bill is based on that average/typical amount. 

Edited June 1, 2021 by 9 Nines

[9 Nines]

1 hour ago, NashvilleNinja said:

Just out of curiosity... how can the IRS continue to classify Bitcoin as a property if it spends as currency? People gonna incur capital gains taxes every time they spend satoshis on a white chocolate mocha?

 

https://www.coinbase.com/card

 

This is the risk that bitcoiners are ignoring in these cyber attacks were ransoms are paid in bitcoins.   If those events start harming society and bitcoin were highly regulated or outright made illegal so as to prevent the ease at which these criminals can extort payment, then holders of bitcoins would be exposed to two crimes:  1) if transacting in bitcoin became illegal, then the crime of dealing with bitcoin and 2) if you try to hide your bitcoin activity, you would also get charged with tax evasion, as Al Capone was, for not reporting.   That is why if strong regulation limiting the use or an outright ban were to take place, for all intents and purposes bitcoin would be pushed to underground activity only and would basically have no value in normal society.   

In other words, bitcoins/cryptocurrency makes these ransoms possible, and if the frequency or severity of these events increase, bitcoin/crypto is likely going to be put away as it would be easy to do as far as normal, establish society not able to transact with it which would take away enough demand, its value would crater. 

Edited June 1, 2021 by 9 Nines

[abenjami]

11 hours ago, OilerTitanHybrid said:

Some interesting news from the offshore betting site in Antigua, that I've been using for over 10 years.  

 

I recently logged in to get a refund from my funds there.  When I did though, I noticed that the only way they do refunds currently is in Bitcoin.   

 

So, I had to jump through some hoops to actually get my refund sent out.  First, I had to open a Bitcoin account, so they could send me my funds, converted into Bitcoin, of course!

 

Then, when I get the funds sent into my Bitcoin account, I have to go to a nearby BTM (Bitcoin ATM) and get the machine to convert the Bitcoin into US Dollars.

 

I have never used a BTM machine before, so I had to look it up and see how to convert it.  Seems like a fairly simple process though...

 

So anyway, I've now been inducted into the Bitcoin bizarro coin world, when I least expected it!  Damn o' mighty...

 

Don't forget to report it on your taxes...

[abenjami]

7 hours ago, NashvilleNinja said:

Just out of curiosity... how can the IRS continue to classify Bitcoin as a property if it spends as currency? People gonna incur capital gains taxes every time they spend satoshis on a white chocolate mocha?

 

https://www.coinbase.com/card

 

Because the tax code in this country is seriously fucked up.

 

Same reason trading futures is taxed differently than trading stocks.  It doesn't make a lot of sense.

[BobbyCoins]

1 hour ago, abenjami said:

 

Because the tax code in this country is seriously fucked up.

 

No shit. Which is why I refuse to sell any crypto I may buy unless there is a massive profit to be realized from it. And even then I won't do it unless life just forced me into it. I'll just stake it if I can and earn passive income off of it or find some other way to realize profit from it. Because that's essentially what will happen if you "spend" crypto using the card Coinbase is pushing, or any other card like it. You're not really spending crypto, you're selling property, at least according to the IRS. Ridiculous.

Of course, there are other reasons not to "spend" crypto. The guy who spent $720M on a pizza could tell you all about those.

Edited June 2, 2021 by NashvilleNinja

[Supdawg]

I ran across this video, about 5 minutes long that is one of the best produced videos I have ever watched on why Bitcoin is important on a global scale. 

 

 

[OilerTitanHybrid]

7 hours ago, abenjami said:

 

Don't forget to report it on your taxes...

I withdraw less than $1,000 per year, as to avoid those damn IRS taxes.  At this rate, I'll be pulling out $999/year for the next 150 years!   

[OilerTitanHybrid]

I saw earlier today that Sheetz will start accepting Bitcoin as payment very soon.    

[abenjami]

7 hours ago, NashvilleNinja said:

You're not really spending crypto, you're selling property, at least according to the IRS. Ridiculous.
 

 

How is that any different than selling a share of stock to buy something else?

[Jamalisms]

5 hours ago, abenjami said:

 

How is that any different than selling a share of stock to buy something else?

The biggest difference is people want to believe crypto is a cash equivalent, not a speculative investment.

[titanruss]

5 hours ago, abenjami said:

 

How is that any different than selling a share of stock to buy something else?

Well one is you have to sell something then purchase with the cash..

 

and the other is you purchase direct with crypto. 
 

many countries don't treat it like the USA does in the way it is taxed. Those countries will win in the end. Money will leave here as the govt continues to steal from us at a higher rate with less benefits than almost any 1st world nation

[BobbyCoins]

 

[Supdawg]

1 hour ago, Jamalisms said:

The biggest difference is people want to believe crypto is a cash equivalent, not a speculative investment.

Only idiots think it's a cash equivalent. 

 

34 minutes ago, titanruss said:

Well one is you have to sell something then purchase with the cash..

 

and the other is you purchase direct with crypto. 
 

many countries don't treat it like the USA does in the way it is taxed. Those countries will win in the end. Money will leave here as the govt continues to steal from us at a higher rate with less benefits than almost any 1st world nation

 

Jurisdictional arbitrage....It is happening more and more these days. 

[OilerTitanHybrid]

I saw this while cleaning out some of our emails.  One from my SO's Schwab email that she got awhile back.  Long ass FAQ's on Bitcoin...

https://www.schwab.com/resource-center/insights/content/bitcoin-does-it-have-place-your-portfolio?cmp=em-QYB

 

What is Bitcoin?

Bitcoin is a virtual, digital, or “crypto” currency—so called because of the cryptography, or unchangeable coding techniques, involved in the blockchain code on which they exist. The intent of Bitcoin is to allow online payments to be made directly from one party to another through a worldwide payment system, without the need for a central third-party intermediary like a bank. Bitcoin is not issued by any central bank or government and is not legal tender. Like physical gold, Bitcoin’s value stems from a combination of scarcity and the perception that it is a store of value, an anonymous means of payment, or a hedge against inflation.

 

What's the relationship between Bitcoin and blockchain?

Blockchain, the underlying technology that supports cryptocurrencies, is an open-source, public record-keeping system operating on a decentralized computer network that records transactions between parties in a verifiable and permanent way. Blockchain provides accountability, as the records are intended to be immutable, which presents potential applications for many businesses. While blockchain has often been associated with cryptocurrencies, it has many potential uses beyond payments, including smart contracts, supply chain management, and financial services. Note that ownership of Bitcoins or other cryptocurrencies is not an investment in blockchain, the technology, or its current or future uses.

 

What is cryptocurrency, and how is it valued?

Fiat currencies like U.S. dollars and euros are forms of money issued by governments to serve as legal tender. Cryptocurrencies such as Bitcoin, on the other hand, are “non-fiat,” non-governmental forms of “digital cash” to be used for electronic payments. The idea of “digital cash” isn’t new; it started with credit cards, PayPal, Venmo and other services’ need for easy, traceable electronic payments. But those payments are tied to fiat currencies managed by central banks, whereas cryptocurrencies are managed by technology, specifically cryptology. Proponents believe the value of a cryptocurrency is based on the quality of the cryptology, the number of cryptocurrency units created, and the technology that limits the creation of additional units. Like any traded item—think baseball cards—the value depends on supply and demand; the less units available, the higher the price buyers are willing to pay.

 

Why has Bitcoin become so popular?

Like many new technologies or products, Bitcoin attracted adherents interested in innovation and the perceived absence of governmental control. Traders saw it as an alternative to traditional investments such as stocks, bonds, and cash, and trading momentum led to a rising, if highly volatile, price. All of this attracted media attention, which drove mainstream awareness and ultimately, increasing acceptance. Most recently, companies including PayPal have announced that they’ll support or accept Bitcoin as a form of payment1.

 

Who oversees Bitcoin?

Bitcoin was created based on a paper written in 2008 by a “founder” who goes by the pseudonym Satoshi Nakamoto, but no person or agency currently regulates it to ensure that it maintains value and liquidity and works as a means of payment. It’s governed by consensus of a private digital community according to guidelines based on the community, cryptology, and a network of computers. It is promoted by the Bitcoin Foundation, but the foundation does not control or manage Bitcoin’s trading or value. The number of Bitcoins in circulation is limited by and managed by computer code and traded through one of several digital, decentralized exchanges.

 

Is Bitcoin the only cryptocurrency?

No. Bitcoin was the first cryptocurrency and it is the best known, most widely held, and—with about 60% of the total cryptocurrency market cap2—the most valuable. However, as of March 2021 there were thousands of digital currencies in the marketplace, of which over 700 have a market capitalization exceeding $20 million. Some of the more popular cryptocurrencies include Bitcoin Cash, Cardano, Tether, Ethereum, Litecoin, and XRP.

 

Will Bitcoin or other cryptocurrencies become the new global currency?

We don’t think so, but time will tell. To be viable, a currency usually requires three characteristics:

It can be used as an inexpensive, reliable medium of exchange;

It can be a unit of account;

It can be a store of value and legal tender honored as a means of payment.

As long as Bitcoin is subject to high volatility and hefty transaction fees, it likely will have only limited use as a medium of exchange, a unit of account or a store of value. Another barrier to broader public acceptance as a true currency is that, as cryptocurrencies become more widespread, the risk of regulation will probably rise—eliminating part of their appeal.

 

Should I invest in cryptocurrencies?

Bitcoin and other cryptocurrencies are speculative investments. Bitcoin doesn’t fit within traditional asset allocation models, as it is neither a traditional commodity, such as gold, nor a traditional currency. Bitcoin’s dramatic volatility is driven primarily by supply and demand, not inherent value. Bitcoin doesn’t have earnings or revenues. It doesn’t have a price-to-earnings ratio, price-to-sales ratio, or book value. Traditional value metrics don’t apply, so there are no methods for assessing its value that we endorse or find persuasive beyond the trading value.

Nevertheless, in the 13 years since the underpinnings of Bitcoin were first described3, the cryptocurrency market has developed beyond an initial experimental phase and continued to mature as a new, unique, and sizable asset class. Several institutional investors and corporations have begun to invest in Bitcoin, and some traditional capital-market participants have introduced crypto-market infrastructure services to make it more accessible. Some investors believe that if the lack of correlation with other asset classes continues, cryptocurrencies could add diversification to a portfolio. These showings of validation and confidence may be self-reinforcing, despite significant outstanding uncertainties around legal, regulatory, and compliance considerations.

Whether or not you should invest in cryptocurrencies depends on your goals and preferences as an investor. We suggest that clients approach it as a speculative investment and consider the high volatility and risks involved. For those who already have a diversified portfolio and a long-term investment plan, we see cryptocurrencies as being used primarily for trading purposes outside the traditional portfolio.

 

Can I get exposure to cryptocurrencies at Schwab?

Yes. We enable several ways to access cryptocurrency markets:

“Over-the-counter” cryptocurrency coin trusts, such as Grayscale Bitcoin Trusts (GBTC and BCHG), Grayscale Ethereum Trusts (ETHE and ETCG), and Grayscale Litecoin Trust (LTCN) offer exposure to cryptocurrencies, although these can involve high expenses and other risks.

Clients with a futures account can also trade Bitcoin futures (BTC).

Many aspects of the cryptocurrency market are still immature, in ways that may pose risks for our clients and for Schwab—and US regulators have not yet clarified their approach. We believe that future SEC approval of a cryptocurrency ETF will be a key step in the market’s development, and an attractive, low-cost option for clients interested in this space. But the SEC has been cautious, prudently seeking to validate that this developing market has appropriate safeguards, for example, against market manipulation. When there is more regulatory guidance, you can expect Schwab to have more investment options for clients, including spot crypto trading and custody. And of course if we do bring new solutions to market, like always, you can expect them to be a great value, designed to support client need and surrounded by the advice and education our clients have come to expect from us and deserve.

 

How are cryptocurrencies taxed?

The IRS treats Bitcoin as property, not currency. Cryptocurrency transactions are taxable by the IRS whenever a taxable event occurs, such as selling Bitcoin for a fiat currency or trading for another asset. Investors are responsible for tracking cost basis, gains, and other reporting. For help, refer to IRS Notice 2014-21, or consult with a tax advisor.

 

What are some risks of Bitcoin and cryptocurrencies?

Financial loss. Bitcoin and other cryptocurrency prices historically have been highly volatile, and fluctuations could result in significant losses.

Future regulation. Cryptocurrency issuance and trading is currently not well regulated, and additional oversight and regulation in the future is likely. U.S. Treasury Secretary Janet Yellen may be poised to curtail the use of cryptocurrencies. In her confirmation hearing on Jan. 19, Yellen noted her concern over cryptocurrencies being used “for illicit financing.” Both the Trump and Biden administrations have proposed regulations.

Fraud and cybercrime. These have already occurred. Given concerns above, cryptocurrencies could come under scrutiny from the Financial Crimes Enforcement Network (FinCEN), for noncompliance with the Bank Secrecy Act (BSA) and anti-money laundering requirements. Bitcoin exchanges have also been subject to computer outages caused by excessive demand, and because the ledgers are held on the internet, a large-scale cyberattack could limit access in an emergency—something less likely to happen with cash or gold.

Theft or loss. A login ID and password is usually required to access a cryptocurrency exchange. If this is lost, hacked, or stolen, access could be denied or lost. While Bitcoins can be stored in physical wallets, so they can be spent without a computer, this creates the same risks inherent in all cash currencies: They could be lost, stolen, or destroyed by accident.

 

Bottom line

Schwab continues to monitor cryptocurrencies as regulations and technology evolve. While some traders may make money on the change in price of Bitcoin or other cryptocurrencies, we suggest that most investors treat them as a speculative asset class primarily for trading with money outside a traditional long-term portfolio.

[9 Nines]

Wall Street Journal calls for making bitcoin illegal to protect society from ransomware. The writing is on the wall, the more cyber attacks and ransom demands that happen, and they are on the rise and linked to cryptocurrency, the more calls for banning the source of demand, cryptocurrencies, will be made: 

https://www.wsj.com/articles/ban-cryptocurrency-to-fight-ransomware-11621962831

 

Ban Cryptocurrency to Fight Ransomware

The existence of bitcoin and the rest benefits nobody except criminals and speculators.
 

No one is out of reach from ransomware attacks. The Colonial Pipeline hack made that clear, along with the nearly 2,500 cases of ransomware—a form of malware that encrypts computer files and holds them for ransom—reported to the Federal Bureau of Investigation last year, a 66% annual increase. In 2020 ransomware victims paid hackers $350 million in cryptocurrency. Since many victims pay ransom without reporting the incident, these numbers understate the damage.
 

The solutions floated after the Colonial hack—improved cybersecurity in the private sector and public-private collaboration to protect critical infrastructure—are pro forma and inadequate. There is a simpler and more effective way to stop the ransomware pandemic: Ban cryptocurrency.

Ransomware can’t succeed without cryptocurrency. The pseudonymity that crypto provides has made it the exclusive method of payment for hackers. It makes their job relatively safe and easy. There is even a new business model in which developers sell or lease ransomware, empowering malicious actors who aren’t tech-savvy themselves to receive payment quickly and securely. Before cryptocurrency, attackers had to set up shell companies to receive credit-card payments or request ransom payment in prepaid cash cards, leaving a trail in either case. It is no coincidence that ransomware attacks exploded with the emergence of cryptocurrency.

It isn’t obvious that cryptocurrency provides any benefit at all beyond the chance to make a quick buck. I have been studying the crypto market since its inception, and I have yet to identify a single task or process that crypto makes easier, better, cheaper or faster. Don’t take my word for it. Ask any friend why he owns cryptocurrency, and the answer will invariably be “to make money.” In other words, speculation. 

 

 

 

Edited June 3, 2021 by 9 Nines