When the Taxman Comes Knocking, Will Americans Report Crypto Gains?

When the Taxman Comes Knocking, Will Americans Report Crypto Gains?

Cryptocurrency investors appear to be skirting their taxes. Whether keeping with crypto’s anti-establishment roots or for lack of ability, American cryptocurrency practitioners are testing the IRS’s tolerance for crypto tax evasion.


Tax day in the United States is tomorrow, April 17, 2018, but according to the popular tax filing service Credit Karma, few cryptocurrency holders have reported earnings or losses on their 2017 tax documents. Out of the company’s 250,000 new filings, under 100 have disclosed capital gains from cryptocurrency investments, figures that are in line with the company’s former reports on cryptocurrency tax documentation.

Certainly, Credit Karma’s user base does not constitute the whole of America’s crypto investor populace. But it could reflect the demographic’s general resistance to paying taxes on their investments, and this could have something to do with the IRS’s policy.

In 2014, the IRS released an official notice regarding its cryptocurrency tax policy. First and foremost, the IRS treats virtual currencies as property, subjecting them to the same capital gains taxes that affect traditional investments like stocks, bonds and real estate. These taxes are applicable to anyone who has received payment for goods and/or services in crypto (as part of a salary, for instance), as well as miners, who must account for gains as part of their income.

The tax code appears straightforward enough, but uncertainty remains. Given that the IRS treats any trade as a taxable event and the onus of reporting rests on the investor, reporting on cryptocurrency investments can seem confusing and convoluted to those untrained in accounting and finance.

“Even with the tax deadline rapidly approaching in the U.S., we’re still seeing lots of people unsure about the proper way to prepare cryptocurrency taxes. Properly accounting for crypto-to-crypto trades, trading on multiple exchanges, and purchases made with cryptocurrency can be an overwhelming task,” Chris Kovalik, founder of Cointaxes, told Bitcoin Magazine.

Kovalik finds that the IRS’s policy places “the burden … on the taxpayer to follow and account for the government’s guidance when filing taxes.” Unlike other tax codes that offer standards and historical precedent, crypto investors have no touchstone for guidance.

According to the Los Angeles Times, the IRS has suggested that taxpayers review “factual scenarios that most closely resemble their circumstances” to seek such guidance, something David Klasing, a tax and accountant lawyer, told the Times amounts to “basically just telling practitioners to take a wild-ass guess.”

And this guess could look to answer questions that stem from a variety of scenarios. Along with crypto-to-crypto trades, “[many] people may simply not know that the IRS has stated that spending crypto is a taxable event, akin to a barter transaction,” Jon Brose, an attorney for Seward & Kissel’s Blockchain and Cryptocurrency Group, told Bitcoin Magazine. This means that day-to-day purchases with bitcoin and other currencies are subject to capital gains taxes.

As the market matures, there are gray areas still. For example, the advent of airdrops and hard forks for cryptocurrency dispersal means investors will likely have to wrestle with reporting these earnings in their income, as well.

As we look down the barrel of America’s first cryptocurrency tax season, early adopters and veteran enthusiasts will likely bear the taxman’s heaviest brunt, as they likely have years of previously unreported gains to follow up on. Depending on the size of their stash, these individuals could be some of the 13,000 users Coinbase was legally obligated to report to the IRS back in February.

These account records are likely to belong to those who have realized great profits from their original investments, not your run-of-the-mill investor. Brose believes that the average investor probably doesn’t think to report gains since “the practical problem of tracking which cryptos you have spent or sold” becomes too much of a hassle for reporting a modest portfolio. He also finds that “individuals that are spending crypto frequently on relatively small items may think that it doesn’t make a lot of sense to declare a taxable event every time they buy a cup of coffee.”

Given that formal guidance is nebulous and the IRS’s ability to enforce their policy is yet to be seen, cryptocurrency investors may be inclined to take calculated risks that have become commonplace in such a volatile market.  

But if the IRS wants investors to work with them in the future, things will have to change, Brose argues.  

“To ensure greater compliance, the IRS ought to make rules for cryptocurrencies that conform to the way crypto actually works and is used, so that taxpayers can accurately compute their tax liabilities arising from crypto transactions.”

Until that time, investors must either navigate their filing themselves, seek help from an accountant or taxation service, or hope their portfolios will fly under the IRS’s radar.


This article originally appeared on Bitcoin Magazine.

What Is Ether?

What Is Ether?

Ether is the underlying token powering the Ethereum blockchain, but it serves a slightly different purpose than bitcoin does to the Bitcoin blockchain. Although ether is traded on public markets and has displayed price appreciation similar to bitcoin, they are quite different by design. Ether is not intended to be a unit of currency on a peer-to-peer payment network; rather, it acts as the “fuel” or “gas” that powers the Ethereum network.


At the highest level, Ethereum is an open-source platform that runs smart contracts. When smart contracts are run on a blockchain, they become self-executing when certain conditions are met. The execution of smart contracts requires computational resources that must be paid for in some way: this is where ether comes in.  

Ether is the crypto-fuel allowing smart contracts to run. It provides the incentive for nodes to validate blocks on the Ethereum blockchain, which contains the smart contract code. Every time a block is validated, 5 ethers are created and awarded to the successful node. A new block is propagated roughly every 15–17 seconds. Some nodes may find the correct solution to a block without having it included in the network. The Ethereum network rewards these nodes with 2–3 ethers.

Individuals interacting with decentralized applications on the Ethereum platform will have to pay the network in ether for the use. Developers are incentivized to create these decentralized applications because they will be paid in ether for their work. Developers are also incentivized to write quality applications because wasteful applications will be more expensive and likely will not be used as frequently as better alternatives.

Using this information, the narrative around ether becomes more clear. Its final use will most likely be abstracted by basic button clicking, but assuming Ethereum becomes widely used, ether will be rapidly moving between users and miners. Its value is directly tied to the use of the Ethereum blockchain.

Is Ether Inflationary?

The total supply of ether is not capped like the total supply of bitcoin. 60 million ether were created during the initial crowdsale, 12 million of which went to early backers and the Ethereum Foundation. Most of the money raised will be used to fund future development initiatives.

Ether’s issuance model is unique in that it does not emphasize deflation like most other popular cryptographic assets. Initially, issuance of ether was capped at 18 million per year, which is 25 percent of the initial supply raised in the crowdsale. But more recently, Vitalik Buterin said that issuance levels will be contingent on security rather than a predetermined schedule. Although this rate is fixed each year, the monetary inflation rate actually decreases every year, making ether a disinflationary currency. Disinflation occurs when the rate of inflation shrinks over time.

Ether is expected to be lost each year because some users may forget their private keys, some may pass away without transmitting their private keys, and some may send ether to an address without a corresponding private key. As the network grows, it is expected that the annual rate of ether lost will equal the annual issuance rate. The hope is that ether will be deflationary in 2140, around the same time that Bitcoin ceases issuing new coins. For an in-depth analysis of Ethereum’s issuance model, read Joseph Lubin’s piece.

These calculations are not set in stone. Ethereum is expected to switch its consensus algorithm from proof of work to proof of stake, which in theory is supposed to be more efficient and require a smaller mining reward. This change has produced some uncertainty within the ecosystem. The Ethereum Foundation is currently researching potential monetary effects and claims that all changes to the network will be handled by smart contracts, as opposed to individuals who may have ulterior motives.

This article originally appeared on Bitcoin Magazine.

Coinbase Buys Earn.com, Gaining Top Talent in the Process

Coinbase Buys Earn.com, Gaining Top Talent in the Process

Cryptocurrency exchange Coinbase is buying Earn.com, a social network that allows users to earn digital currency by replying to emails and completing small tasks online.


Coinbase CEO Brian Armstrong made the announcement in a blog post today, April 16, 2018. In addition to welcoming the entire Earn.com team, Coinbase has made Earn.com co-founder and CEO Balaji Srinivasan its first CTO. Both companies are located in the Bay Area.  

This is Coinbase’s fifth acquisition so far and its most substantial to date. Only last week, the exchange purchased decentralized app browser and Ethereum wallet Cipher Browser. Coinbase has not revealed how much it paid for Earn.com, but to offer an idea of the company’s evaluation, Earn.com has raised more than $120 million in a series of funding rounds.

21 Inc

Earn.com began life as 21 Inc, a startup best known for creating the 21 Bitcoin Computer, essentially, a Raspberry Pi connected to a bitcoin-mining ASIC, with the idea of building bitcoin miners into devices people already use. The computer first began shipping in November 2015.

In October 2017, 21 Inc rebranded itself as Earn.com and notified customers it was ending support for its Bitcoin Computer to focus on allowing users to monetize their email and social media channels instead.

Currently, Earn.com pays users in bitcoin, but the company has also developed its own Ethereum-based ERC20 token, dubbed the “Earnable Token,” so that when people complete tasks in Earn.com, they can earn rewards in tokens. The company stated before, there will be no initial coin offering. Users earn tokens for simply signing up on the platform.

Coinbase does not support ERC20 tokens yet, but last month, the exchange announced plans to add support for ERC20 technical standards to all its trading platforms. Earlier this month, Coinbase also entered into talks with the U.S. Securities and Exchange Commission to become an alternative trading system (ATS), which would enable it to trade security tokens.


Aside from all that, Coinbase acquired Earn.com for its talent. Srinivasan himself comes with an impressive skill set. Prior to serving as the CEO at Earn.com, he was general partner at venture capital firm Andreessen Horowitz, where he still sits on the board. He has a B.S., M.S., and Ph.D. in electrical engineering and an M.S. in chemical engineering at Stanford University.

In a blog post, Srinivasan details how he took over the gasping 21 Inc in May 2015 and turned it around from a company that was more than $80 million under water to what it is today, “a fast-growing, cash-flow positive business with a multimillion dollar revenue run rate,” he said.

The plan is to take Earn.com and “scale it up across Coinbase’s massive user base,” Srinivasan said. Although the new Coinbase CTO was equally tight-lipped on how much Coinbase paid for Earn.com, he added, “And with this deal, the total value of cash, cryptocurrency and equity returned to our shareholders is now in excess of the capital invested in the company.”

This article originally appeared on Bitcoin Magazine.

Chinese Merchants in Moscow Convert Most of Their Cash to Crypto

Chinese traders in Moscow&#8217;s huge wholesale bazaars have become the most active buyers and sellers of cryptocurrency in the Russian capital. The retail turnover there is estimated at almost $10 billion a month. Authorities say that most of it is converted to cryptocurrencies and sent back to China where it&#8216;s exchanged to yuan. &#160;&#160; Also [&#8230;]<br />Post source: Chinese Merchants in Moscow Convert Most of Their Cash to Crypto<br />More Bitcoin News and Cryptocurrency News on TheBitcoinNews.com

Promoted: Plutus Shapes New World of Point-of-Sale Crypto Transactions

BTC Dinner

In 2009, Satoshi Nakamoto, the mysterious founder of Bitcoin, released a white paper proposing a radical shift away from prevailing fiat money transactions. Nakamoto begins the white paper with an abstract,


“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”

Today, there is significant attention around bitcoin and other cryptocurrencies. While they are most often looked at as a speculative asset, questions remain about day-to-day utility of cryptocurrency. For many businesses, accepting digital currencies might not seem worth the trouble, given that the process can be beset with unpredictable fees, a perceptually steep learning curve and other transactional complexities. Setting aside the risk component, one reason why businesses have avoided adoption is the fact that few point-of-sale systems can efficiently accept crypto payments.

In alignment with Satoshi’s vision, a London-based company known as Plutus has set its sights on igniting a new age of crypto-based point-of sale transactions. Founded in 2015 by Danial Daychopan before being successfully funded the following year through its pluton (PLU) token crowdsale, Plutus is a decentralized payment ecosystem that permits cryptocurrency payments anywhere in the world through the use of a decentralized, escrow-based model.

Plutus’ vision is to deliver cryptocurrency payment options to the general public. The fundamental value they see in this territory is that it is the launching point for boosting cryptocurrency user growth and adoption for point-of-sale commerce.

Plutus offers consumers a trusted and secure platform for the conversion of cryptocurrency into fiat currency, as well as the reverse. The user can spend without being charged astronomical fees while simultaneously benefiting from incentives tied to automatic pluton loyalty rewards.

This loyalty element is pivotal to Plutus’ value proposition in that consumers can earn plutons for purchases executed through their digital app. Akin to frequent flyer miles or loyalty points, these tokens, which are facilitated through the Ethereum blockchain and transacted utilizing the Plutus mobile app, can be used to pay for everyday goods and services. There are zero transaction fees and near-instant transaction confirmations.

Orchestrating the Next B2C Payment Universe

Creating a decentralized crypto infrastructure to foster business to consumer commerce is no easy proposition. But the team at Plutus appears up for the task. The current platform they have engineered is composed of three foundational building blocks: Plutus Tap & Pay for Android and iOS, the Plutus debit card, and PlutusDEX.

The “Tap & Pay” element is predicated on a blockchain-driven debit card network that will allow crypto spending at brick and mortar stores worldwide. This solution allows Plutus to usher in contactless bitcoin and ethereum payments at any merchant location worldwide utilizing near field communication (NFC) checkout terminals.

With this advancement, customers can use their Plutus app at debit card terminals across the world to spend their digital currency at no cost, usurping the need for physical debit cards, credit cards or cash. Users simply hold their phone or mobile device over the card reader to debit money from the BTC or ETH loaded onto their app for payment.

Then there’s the Plutus debit card, which can be used to make payments both at local storefronts as well as online. This card can be loaded and reloaded through Plutus Tap & Pay.

Together, the Plutus app and Plutus debit card, can be used anywhere credit cards are accepted, an estimated 40 million stores. 

Finally, there is PlutusDEX, a peer-to-peer, smart contract exchange that provides the liquidity for the Tap & Pay app. It’s here where plutons can be converted, allowing users the ability to make in-store purchases with zero conversion fees. Plutus traders by way of the DEX exchange have the ability to purchase small denominations of bitcoin, ethereum and pluton from Tap & Pay users and load it as cash on a Plutus debit card or Tap & Pay balance. Designed to be a seamless experience, this process can be set up through email and phone verification without a lengthy know your customer (KYC) onboarding.

A major advantage of the Plutus gateway (DEX) is that user cryptocurrencies are never stored, eliminating the need for a central hot wallet or cold wallet. Rather, transactions occur peer-to-peer using an order-matching engine that allows customers to send currency between each other.

Escrowed fiat funds aren’t transferred to a customer card until they have successfully been executed via a cryptocurrency transaction that’s then posted and confirmed by miners on the public blockchain. In other words, the crypto is directed to the purchaser’s wallet of choice, before the fiat is released from escrow to the card.


HitBTC, Liqui, and EtherDelta are among the exchanges where pluton can be purchased directly using bitcoin, ethereum and U.S. dollars.

Crypto Acceleration Meets Financial Utility

Unlike many in the blockchain space, Plutus Founder Danial Daychopan has a successful track record of bringing ideas to market. In 2013, he was the seed behind the U.K.’s first licensed exchange and merchant processor, spurring public awareness of blockchain-driven payment systems. Now, with his eyes set on leapfrogging traditional, centralized exchanges with their inherent vulnerabilities and limitations, Daychopan endeavors to have Plutus become the trendsetter behind decentralized application payment systems. Through this he hopes to unleash the immense potential situated at the nexus of contactless payments and blockchain technology.

Daychopan says that historically merchant adoption in this space would have involved building a new distribution network, with additional fees for retailers and businesses, thereby slowing network accessibility. He touts Plutus’ innovative model, which allows merchants to have instant access to fiat currency while giving consumers the option of easily spending and converting their cryptocurrency.

In terms of the road map ahead for Plutus, Daychopan had this to say in closing: “The app is available in Europe. We are currently receiving legal guidance, and some adjustments may have to be made before enabling a U.S. launch. Payments can be made both online and in person, wherever regular debit cards are accepted.”

This promoted article originally appeared on Bitcoin Magazine.

Cardano Price Jumps 10% After Huobi Confirms Listing

Smart contracts platform Cardano rose 10% April 15 after China-based cryptocurrency exchange Huobi announced it would add its ADA token. Huobi Excites ADA Markets An update specified deposits would become available April 16 on the Huobi Pro international trading platform, with trading itself commencing a day later. Cardano, which founder Charles Hoskinson confirmed had debuted on the exchange, sparked fresh enthusiasm among traders this month after developer IOHK committed to a host of major upgrades.<br />Read More<br />The post Cardano Price Jumps 10% After Huobi Confirms Listing appeared first on Bitcoinist.com.