Sirwin
Sirwin

Cryptocurrencies only gain legitimacy as calls for regulation loom


Cryptocurrencies have entered a bit of a lull after an overall massive bull run in 2020. While the all-time highs have passed (for now), the subject of crypto is still red hot. While Elon Musk has taken a break from tweeting about Bitcoin, Dogecoin, and Cumrocket this week, lawmakers and government agencies are calling for regulation. Amid ransomware attacks and other cybercrime, clearly there is a need for increased protection from such nerfarious activity. IRS Commissioner Charles Rettig made a call this week before the Senate Finance Committee for more funding to combat cyber criminals and to increase efforts for tax collection on crypto transactions.

Currently, the IRS guidelines for what they refer to as "virtual currency" state that "For federal tax purposes, virtual currency is treated as property." Taxes must be paid on gains upon exchange of virtual currency for other property. In short, if you think you're avoiding taxes by swapping your Bitcoin gains for Ethereum (or any other cyrpto) -- you're not. You still owe taxes on the gains. Initially released in 2014, the IRS guidelines were last updated in December of 2019. Always consult with your tax professional for advice.

There are several cryptocurrency tax services:

Please note: This is not an endorsement for any of these services and links are just for informational purposes.

It's becoming increasingly clear that the US government's view on cryptocurrencies is shifting: from what was once deemed "collectible" is now being seen as an asset class. Every week, a new pension fund or large investment firm is taking a stance on digital currencies. While prices may have run up too much too fast, Bitcoin has found new support - trading in the 32k to 38k range recently.

Also this week, Interactive Brokers announced that they plan to offer crypto trading sometime this summer. Just as Coinbase fulfilled demand for Dogecoin, IBKR is heeding the call for digital coin trading. Founder and chairman Thomas Peterffy said trading should be available within a few months and did not specify which assets would be tradeable. 

So, what does regulation bring to the world of cryptocurrency? In my mind, legitimacy. The skeptics who call digital currencies "a scam" or "imaginary tokens" will have to come up with something better, as Uncle Sam comes to collect on crypto gains.

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What leaves me wondering is how can the Securities and Exchange Commission step in to protect crypto investors?

This blog post is not intended as financial or tax advice. 


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RocketEnthusiast
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dot com boomer - writing mostly on crypto, stocks, entertainment, etc.


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