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Congress Weighs In on Cryptocurrency Taxation

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Bipartisan members of the House are advocating for more clarity in the tax law as it relates to taxation of cryptocurrency.

First, on April 9, Representative Warren Davidson (R-OH), a member of the House Financial Services Committee, reintroduced legislation that would provide clarity on certain tax and securities law issues related to cryptocurrency.  The bill, entitled the “Token Taxonomy Act of 2019,” resembles the original bill that Davidson introduced in the 115th Congress with Congressional Blockchain Caucus co-chair Darren Soto (D-FL).  The 2019 version of the bill is co-sponsored by Representatives Soto, Josh Gottheimer (D-NJ), Ted Budd (R-NC), Scott Perry (R-PA), and Tulsi Gabbard (D-HI) (who has announced she is running for President).

Davidson said in a statement that “[t]he Token Taxonomy Act is the key to unlocking blockchain technology in America.  Without it, the U.S. is surrendering its innovative origins and ownership of the digital economy to Europe and Asia.”

The bill would enact a number of new tax provisions.  The new tax provisions apply only to “virtual currency,” which is generally defined as “a digital representation of value that is used as a medium of exchange,” and so would not apply to digital tokens that are not used as a medium of exchange.  The tax provisions of the bill would:

  • Expand like-kind exchanges under section 1031 to include virtual currencies. The tax legislation enacted at the end of 2017 limited like-kind exchanges completed after December 31, 2017 to exchanges of real property.  However, taxpayers would still need to determine whether exchanged virtual currencies are treated as “like kind” in seeking to qualify for this tax-deferred treatment.  As a result, the ability to conduct like-kind exchanges of virtual currencies would be uncertain, as it was prior to 2018.
  • Create a de minimis exclusion from gross income for up to $600 (indexed to inflation) of gain from certain sales or exchanges of virtual currency for property other than cash or cash equivalents. This provision would help taxpayers avoid recognizing gain when they use appreciated virtual currencies for small consumer transactions.  Under current law, a taxpayer who purchases even a small item—such as a cup of coffee—with appreciated virtual currency generally recognizes gain on the increase in the value of the virtual currency during the time that they held it.
  • Authorize the Treasury Department to issue regulations providing for information returns on transactions in virtual currency for which gain or loss is recognized. It is unclear how current information reporting rules apply to many virtual currency transactions.  Guidance from Treasury could be very helpful to taxpayers who want to ensure that they are compliant with tax reporting rules.  However, in order to create an administrable system that is not overly burdensome to taxpayers, the guidance would have to be implemented in a way that is sensitive to the unique issues surrounding transactions executed via blockchain.
  • Clarify that an IRA may hold virtual currencies under rules similar to those currently in place for certain metallic coins or bullion.

Although the bill has bipartisan support, the challenge will be to find a vehicle for passage.  Possibilities include an extenders package or disaster relief, but including additional tax provisions will likely face opposition.

Second, on April 11, a group of 21 bipartisan members of Congress sent a letter to the IRS urging them to provide guidance on the tax consequences for taxpayers that use virtual currencies.  While the letter acknowledges the 2014 guidance released by the IRS, it stresses that there are still many open questions.  It identified three areas where there is an “urgent need” for guidance:  (1) how to calculate the cost basis of virtual currencies; (2) how to allocate basis to particular lots of virtual currencies; and (3) the tax treatment of forks.

Although the IRS has been considering cryptocurrency guidance, it currently has its hands full with implementing the 2017 tax legislation.  It is possible that the IRS will consider “informal” guidance, such as FAQs on its website, as previewed by Commissioner Rettig last November.

Source: https://www.steptoeblockchainblog.com/2019/04/congress-weighs-in-on-cryptocurrency-taxation/

Blockchain

Bitcoin Price Has Only Ever Spent 93 Days Above $11,500

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With Bitcoin’s price hovering around $11,500, recent data indicated that the asset had spent only about three months of its existence above that particular level.

BTC: Only Three Months Above $11.5K

The official launch of the first-ever cryptocurrency came in early January 2009. Born during the last massive financial crisis, Bitcoin was this “magical money” that actually lacked any significant attention in its initial years. Consequently, its price traded close to zero for a while.

Since then, however, Bitcoin started gaining traction that ultimately resulted in severe volatility throughout the years. The massive fluctuations took the asset towards an all-time high in December 2017 of nearly $20,000, and just a year later, BTC saw its price beneath $4,000.

Fast-forwarding two years and Bitcoin is currently positioned around $11,500. Although this level is nearly twice as less as the all-time high, recent data from the analytics company Skew informed that BTC hadn’t spent a lot of time above $11,500.

Historical Performance Bitcoin Price. Source: Skew
Historical Performance Bitcoin Price. Source: Skew

More precisely, BTC’s price has hovered above $11,500 for only 93 days (or three months) since January 2009.

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Fundamentals in Place

Apart from the data above, Bitcoin’s hash rate has experienced a significant boost even after the completion of the third halving in May. As CryptoPotato reported recently, the metric measuring the computing power miners use to validate transactions on the BTC blockchain reached a new all-time high of 170 exahashes per second. This represented a 40% increase in the five months following the halving.

Although the hash rate is not correlated with the price, another report suggested an upcoming price increase. By indicating that Bitcoin whales, meaning entities with at least 1,000 coins, have slowed down accumulation, Glassnode asserted that this could ultimately be a bullish sign for the asset price.

Historically, once whales have stopped buying massive quantities, this has led to an opportunity for retail investors. According to the analytics company, Bitcoin may be in the “beginning of a run-up to a market top.”

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Source: https://cryptopotato.com/bitcoin-price-has-only-ever-spent-93-days-above-11500/

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US Fed Chair Jerome Powell Says It’s Better to Be Right Than First on CBDC

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  • US Fed Chair Powell believes that the United States should focus on getting right the development of a central bank digital currency (CBDC), rather than attempt to be first.
  • While speaking on a panel hosted by the International Monetary Fund (IMF), Powell reassured that the US is “committed to carefully and thoughtfully evaluating the potential costs and benefits of a CBDC for the US economy and payments system.”
  • Although Powell admitted that the digital currency has the potential to improve the current payments system, he claimed that the Fed hadn’t made a final decision on launching its own.
  • Reports from earlier this year suggested that the Federal Reserve had started experimenting with a hypothetical digital currency.
  • Nevertheless, today’s speech showcased that the US central bank is still unconvinced by that idea. In contrast, the other global superpower China has been making serious improvements on the matter. 
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  • CryptoPotato reported earlier today that China had taken the CBDC tests to its citizens by airdropping $1.5 million worth of the digital yuan and urging them to buy goods. However, the initial results weren’t promising as users said it didn’t offer anything groundbreaking. 

Featured Image Courtesy Of CNBC

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Source: https://cryptopotato.com/us-fed-chair-jerome-powell-says-its-better-to-be-right-than-first-on-cbdc/

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Bitcoin Price Eyes $12,000 Following US Fed Chair Powell Talks

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  • Bitcoin’s price finally made a worthwhile move after surging to $11,840 on Bitstamp following days of stagnation.
btcusdh_chart
BTC/USD. Source: TradingView
  • The price has since retraced a bit to trade at its current level of around $11,780. Nevertheless, this is a move in the right direction as concerns started crippling up that we might be in for a fill of the CME gap down at $11,100.
  • Bitcoin is trading approximately only $700 away from the $12,500 area – the 2020 highest level that was reached on August 17. The next major resistance for BTC now lies at $12,000 – $12,100.
  • The move came soon after the Chairman of the US Federal Reserve, Jerome Powell, spoke on a panel hosted by the International Monetary Fund (IMF).
  • During the event, he said that the US is “committed to carefully and thoughtfully evaluating the potential costs and benefits of a CBDC (Centra Bank Digital Currency) for the US economy and payments system.”
  • He also said that it’s better to be right than be first on CBDCs.
  • Interestingly enough, BTC’s move appears to be uncorrelated to the US stock market. At the time of this writing, the S&P 500 is down about 0.4%, while the Dow Jones Industrial Average (DJI) is down about 0.3%.
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Disclaimer: Information found on CryptoPotato is those of writers quoted. It does not represent the opinions of CryptoPotato on whether to buy, sell, or hold any investments. You are advised to conduct your own research before making any investment decisions. Use provided information at your own risk. See Disclaimer for more information.

Cryptocurrency charts by TradingView.


Source: https://cryptopotato.com/bitcoin-price-eyes-12000-following-us-fed-chair-powell-talks/

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