On March 3, the IRS held an invite-only event dubbed the Virtual Currency Summit. According to Forbes, the event was held at the agency’s Washington DC headquarters. Various stakeholders from the crypto industry were invited to share their views on taxation in the sector. It consisted of four panels, each of which was 90 minutes long. Here are some of the key points from this summit.
The Anonymity of Bitcoin Does Not Exist
Many in the crypto sector believe that Bitcoin offers its users anonymity. However, the IRS revealed that they were able to trace all BTC transactions. During the event, Chuck Rettig, an IRS Commissioner, talked about a recent indictment against two Chinese citizens who helped North Korea launder over $100 in stolen crypto coins. To identify the hackers, the IRS used tools such as Chainalysis to track the funds of these two people across 113 crypto wallets. According to the IRS, while they cannot tell where your fiat currency was before you had it, the can pinpoint the origin of every Bitcoin in your wallet
Classifying Crypto as Property is Not Perfect
During the event, an IRS agent discussed the updated guidance issued by the IRS. He noted that the classification of crypto as property had caused some confusion. He noted that when the guidance was issued in 2014, most cryptocurrencies were similar to BTC. However, various crypto coins have been created since then, which have unique use cases. He said that the IRS was aware of this evolution of the crypto market and the treatment of all crypto coins as property might no longer be feasible. They also talked about how other regulators were classifying crypto. For instance, they noted that the SEC considers some coins to be securities while the CFTC considers some coins to be commodities.
Crypto Taxation Software Is Not Perfect
One attendee noted that several programs for calculating crypto taxation had emerged. However, a recent study by COinDesk found that each program gave various results from the same data. As a result, users of these programs need to be careful when using them.
Creating a Central Depository for Data in the Crypto Sector
The IRS proposed the creation of a Central Depository for the crypto sector to aid with tax compliance. Exchanges would be compelled to send all their data to this depository for regulators to use when they needed it. However, representatives from Kraken and Coinbase pushed back against this idea due to concerns about data security and privacy.
Comment Letter from AICPA
Panelists discussed the comment letter sent by the American Institute of Certified Public Accountants. Specifically, they talked about crypto donations. These donations are subject to the non-cash property donation rules. If you donate any crypto over $5,000, you have to use a qualified appraiser. However, there is a lack of clarity on what constitutes a qualified appraiser in the crypto sector. The letter suggests that crypto donations should not need to be appraised since spot pricing can be confirmed by anyone with access to the internet.
This summit shows that the IRS is interested in having a better understanding of the crypto sector. In the future, this could lead to better policies by the IRS when it comes to crypto taxation. Thus far, their policies have caused a lot of uproar and confusion in the crypto sector.
Image Source: Pixabay
Notice: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. The information has been obtained from sources we believe to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Authors may own the crypto currency they discuss. The information and content are subject to change without notice. Visionary Financial and its affiliates do not provide investment, tax, legal or accounting advice. This material has been prepared for informational purposes only and is the opinion of the author, and is not intended to provide, and should not be relied on for, investment, tax, legal, accounting advice. You should consult your own investment, tax, legal and accounting advisors before engaging in any transaction. All content published by Visionary Financial is not an endorsement whatsoever. Visionary Financial was not compensated to submit this article Please also visit our Privacy policy; disclaimer; and terms and conditions page for further information.