I don't think so. According to the press release from the agency heads, the hearing was called to clarify jurisdiction and regulatory responsibility between the SEC and CFTC. It has nothing to do with tax guidance. I don't think the IRS has any involvement.


No, the SEC regulates securities. They are not a tax authority. The IRS has already said that digital currencies are treated as property for tax purposes. Every trade is a taxable event. Like-kind exchanges already weren't allowed; that categorization became more restrictive with the new tax code but nothing changed vis-a-vis Bitcoin. Declaring only fiat exchange activity doesn't fit within the tax code. They would need to rewrite it to addresses cryptocurrencies for that to become true. That probably won't happen for years.

More of a question of ethics than law.


I'm not sure what one has to do with the other, specifically. When I read the whitepaper and early mailing list posts, Bitcoin is framed as a way to remove trusted third parties (like banks) from financial transactions. No more, no less. I see it as a tool, not as a reason to avoid paying taxes.


Unfortunately, the government probably knows a lot more than we think. And everything on the blockchain is permanent, so a lot of privacy attacks can be performed with no time limits. Whether you can just claim loss from theft is a matter of risk analysis. Maybe you can get away with it, maybe not. When it comes to the IRS, they might claim you owe taxes on holdings even if you lost them all to theft.

That's true. The US does often act unilaterally. Dealing with US customers implies serious risk from a business standpoint. But it's also a massive market, which is why there will always be institutions seeking their business. Either you have deep pockets for compliance and regulatory risk (like Coinbase), or you operate in the grey/black markets.

I'll be curious to see how organizations like the WTO decide on international cryptocurrency services. For example, in spite of all its takedown and seizure attempts, the WTO ruled against the US government in the Bodog case. An Antiguan license confers the legal right to offer gambling services to the US market, regardless of what the US says. The US authorities dropped all felony charges against Calvin Ayre in that case. So they're not omnipotent.

I wouldn't assume anything yet. The Senate Committee on Homeland Security and Governmental Affairs held a congressional hearing on Bitcoin back in November 2013 too. Nothing came of it, although I admit that the tone this time feels a bit more serious.


Personally, I'm more worried about joint regulatory actions (e.g. among G8 or G20 nations, or the EU). These hearings seem aimed at SEC and CFTC oversight with regard to consumer protections. Eventually, governments may feel threatened by Bitcoin, but their position still seems to be that it's too small to matter. If the price goes another order of magnitude higher, that may not be true anymore.

Maybe they are getting some heat from US regulators. I wouldn't take it as a sign of Facebook's long term direction. They are well-positioned for the digital wallet and remittance sectors, and those will inevitably include cryptocurrencies. They might be feeling some pressure to do something after recent comments from SEC and CFTC, which hinted at upcoming actions against bad actors in the space.

The Facebook and Youtube scenes seem full of scams, referral shilling, HYIPs, etc. It's probably for the best. Hopefully this is temporary while they craft a policy that prohibits "misleading or deceptive promotional practices" but at least allows educational crypto ads.

If there's no gain, there's no tax. They're just trying to capture the capital gains, not tax you for using BTC.

On the flip side, if you lose money by holding BTC and then spending it, that's a loss that can offset other taxable gains. It's a real bitch to keep track of, though.


That works for CPU mining with your PC in the early days, but that's about it. The IRS has a taxation scheme for just about everything. Mining and regular work paid in BTC is ordinary income. So even if you don't invest USD directly into BTC, they'll argue any bitcoins you "made" without investment were income.

It depends what you mean by "verified." You can deposit/withdraw cryptocurrency and trade against fiat currencies on Kraken with no documents and limited info (name/DOB/country/phone number). People have been known to use fake names for Tier 1 verification. It's not my favorite exchange, but I've used it to store USD during corrections. Here is the info on verification.


We don't know for sure that the Tether printing is un-backed, although it's pretty likely. Bitfinex has already lost its Polish bank account, so how exactly is Tether getting $100 million wires on a daily basis? It's obvious what they're doing with the USDT injections. Every Tether grant gets sent directly to Bitfinex and large BTC markets buys usually happen shortly after. I remember 2013, and watching USDT is a bit like watching the Willy bot.

That depends on what kind of fork it is. For example, a soft fork that occurs without majority miner enforcement can cause a “wipeout attack” on the original chain. Replay protection is not possible in soft forks, nor would it be required. So, this can happen in a UASF:

1) UASF occurs with very little hash support.
2) The majority of transaction volume moves to the UASF fork, even though it’s the minority fork.
3) Miners, driven by profit motive, switch to the UASF fork.
4) Eventually, the UASF chain gets more cumulative work than the legacy chain. This causes a chain reorganization that “wipes out” all transactions on the legacy chain going back to the fork block.

That means that anyone who received a payment between the UASF block and the reorg will lose that money. Given the time involved, it’s possible that thousands of confirmations could be undone. This is an extreme scenario, but it’s good to be aware of.

We can increase the 4MB block weight (but not the legacy 1MB block size) with an additional soft fork. And we could discount the data (fees) in proportion to the block weight increase, like we did with Segwit. So we can potentially move a lot more signature data outside of legacy blocks.

But that kind of consensus change doesn't come without risks. I think conservative bitcoiners will want to see evidence that > 4MB blocks are safe and won't greatly harm the network before they'd support that.

Ideally, we're looking at a multi-faceted approach. Most of the transactions volume will hopefully move to upper layer protocols like Lightning, sidechains, etc. New features like signature aggregation will trim the fat from on-chain transactions. And eventually we can think about another block size/weight increase.

The price of the phone (in BTC) can be used to determine the fair market value. Let's say you bought some BTC and later traded some of it for the used cell phone. If the phone cost 0.02 BTC, then the market value of BTC at the time of the transaction determines the fair market value. Let's say the price of BTC was $1000 when you bought the phone:

0.02 BTC x $1000 = $20. That's the fair market value of the phone.

Now let's consider the basis of your BTC. Let's say you bought BTC at $500; that's your basis. That means that the 0.02 BTC that you traded for the phone has this basis: 0.02 BTC x $500 = $10.

That means you realized a $10 gain when you bought the phone.


It's harder to make this argument with Bitcoin because it is widely traded. You can't argue "we dont know how much" because we have widely accepted tickers. There is no market for used calculators, but it's quite easy to tell you what 1 BTC is worth at this moment. (Next question: What exchange price should you use? Answer: It doesn't particularly matter as long as you are consistent and the exchange you cite isn't divergent from the market)

This. It's pretty simple. The IRS expects you to treat every virtual currency transaction as taxable. They keep repeating it, but people keep saying "but there's no fiat involved!"

Every "position" you hold in cryptocurrency has a "basis": What price did you buy it? That's the basis. What price did you sell it at (whether for cash or in exchange for goods/services)? That's the adjusted basis.

This is from the IRS guidance on virtual currency published in 2014:

Here's what I don't get. 50 Cent filed for bankruptcy in 2015. TMZ says the coins sat in "his account" for years. What account, a Coinbase account? A bitcoin wallet?

The coins were still worth > $400,000 when he received them, so I'm curious what the creditors in his bankruptcy settlements think about this windfall. My thinking was, if you hide BTC from bankruptcy (or divorce) proceedings, you shouldn't go tell TMZ about it later.

Even if you are using mixed coins, you have to account for the merchant or payment processor you are interfacing with. Do they know your physical address? Email address, IP address? These details can be used to identify you. They can also be "leaked" because of insecure third party trackers/cookies. Between precise timestamping, the immutable blockchain and leaked transaction data/personally identifiable information, clustering attacks and blockchain analysis of a mixer's wallets can (up to a certain probability) be used to identify your originating wallet. And if you use a lightweight client like Electrum, you're also leaking wallet information to Electrum servers that can help to corroborate that connection (and also link your wallet to an identifiable IP address range).

I don't think the IRS necessarily cares to do this over low-value cryptocurrency transactions. But I think it's important to be aware that the government (in tandem with blockchain analysis companies) knows much more than people tend to think about your transactions. We shouldn't assume they don't have any means to deanonymize us. And we should be weary of exposing our real personal information, IP address, etc. when interacting with merchants and third party payment processors:

There's more to it than that. For example, I only have 46 sMerit:



It looks like the merit system is being added on top of the activity/rank system. So there are now additional requirements before you can attain a new rank. It seems like an account that reaches 60 activity will no longer automatically rank up to Member. They'll now need 10 merit as well.

Regarding reductions:

5% ownership is massive. I would have expected that nearly 100% had heard of Bitcoin by now -- you would need to avoid virtually all cable and print news and social media in order to be totally ignorant of it. But I'm glad to see that popular accumulation has really begun. 5% is several times higher than I expected at this point.

My first reaction was to assume that they must have focused on younger people. But apparently, the survey is weighted to account for population demographics:

If this trend continues, it's tempting to think that the US government won't eventually crack down harshly on Bitcoin. Then I remember what happened to gold:

Bad timing, given that Lightning will probably be in production use this year.

But I'm not surprised, either. The narrative that people are avoiding using Bitcoin because of the associated fees isn't untrue. I use Bitcoin all the time -- but markedly less over the last several months. When I could reliably get confirmations at 1-5 satoshis/byte (and this was a few months ago), I sent payments freely. Now I mostly just consolidate outputs at the lowest fee rates I can. And I see the current drop in fees mostly as an opportunity to further consolidate outputs -- not to spend them.

I'm hoping that companies like Stripe who are dropping out of the sector now will be like the Circles of 2016. My guess is that these are the companies who couldn't sustain through the growing pains, and will therefore miss out on market share during the next boom cycle.

Maybe you missed the point about "hash rate drops that throw Bitcoin's byzantine fault tolerance in question." I wasn't making a statement about potential attacks on the system as is. The context is dwindling block reward (due to lack of fee income), which disincentivizes mining and sends hash rate into a downward spiral. Consider this IRC discussion from 2015:



Of course it will affect the market. So does Bitcoin's current and historically high inflation rate. The point was that it might have made economic sense -- particularly from a long term perspective -- to pay (via inflation) for better security guarantees. Those security guarantees may in turn have made your investment more valuable in the long run. I assume this is why Peter Todd feels this way:



Yes. Unless the protocol became fundamentally broken, in which case, users might be incentivized to fix it. We'll see how Bitcoin fares when the subsidy begins to run dry:

Yup, after thinking about it, this much is obvious. I've recently gotten access to an unlimited fiber connection, so I plan on running a Core node and setting up an Electrum server for my watching-only wallet setup. This way, I'll only be leaking my wallet details to my own server (I hope). I'm hoping that setting up a server is self-explanatory.

There's no way to use Core as an offline signing wallet is there?

Like I said, your claim is that cash transactions are essentially illegal and that blockchain transaction history is inadequate (even though Bitcoin and altcoins are obviously used to transfer immense value). You should stop using cryptocurrency if that's your position. I'd like to see the statutes in question because you keep making these claims.

If you think that everyone "in Europe" is being treated as a criminal for cashing out of Bitcoin, then you are delusional.


Actually, you are completely wrong. Again, I have been doing this for years and I've always consulted competent tax advisors. Qualified accountants, attorneys and the IRS agree that this is how table game income works in the US:



Says who? Show me the law.

And if that's really the case, then you should read between the lines. The fact that Mintpal (for example) has no records to refute you only works in your favor. It's clear as day that billions of dollars are transacted in cryptocurrencies every day. It's also clear as day that the vast majority of these transactions are not recorded in a way that can be transmitted to tax authorities systematically.

You can either work within that context and pay the taxes you owe, or you can keep complaining about how there is no systematic government-whitelisted approach to doing that. Your choice.


That's unfortunate but it's your fault and just indicates that you were never serious about paying your taxes to begin with. As I said, I paid all taxes owed on Mintpal and Cryptsy several years ago.

Fortunately for you, the fact that Mintpal and Cryptsy don't exist to refute your trading records actually works in your favor. There is functionally no difference between Mintpal trading records you fabricate today, and my real trading records from 4 years ago. But you continue to irrationally go on about "every satoshi movement inside exchanges" as if tax authorities could ever determine the truth.


There are no precedents. You might wait years for clarity. This is like the meme of the skeleton waiting for the Bitcoin price to dip.

The cautious move was to consult an accountant/lawyer years ago -- and certainly when tax liabilities for the previous trading year arose. Just because cryptocurrencies are a new asset class doesn't mean you could assume that taxes didn't apply like other assets.


That means you you didn't treat it as ordinary income, which usually triggers tax liabilities in the tax year you earned it. The honest thing to do is amend your previous tax returns to declare your income from previous years. Alternatively, there are a host of options, but none of them are technically honest nor legal. And since you believe that every satoshi must be accounted for including links to exchanges with KYC, it sounds like you are between a rock and a hard place.

That's not entirely true. It really depends whether the original design's transition from subsidy to fees works as intended. The recent uptick in the fee portion of block reward is a good sign, but we still have very limited data. The premise that fees will replace subsidy without fundamentally threatening the network's security is still untested. It's theoretically possible that waning future block rewards could lead to hash rate drops that throw Bitcoin's byzantine fault tolerance in question. Severe enough drops in hash rate could allow older generations of hardware to come back online, opening up the possibility of massive block reorganizations -- and therefore utter unreliability as a value/monetary system.

If this were to happen, a perpetually low but predictable inflation rate -- which guarantees some mining security incentive (fees cannot do that unless they are mandatory and sufficiently high) -- would look very attractive in comparison. That's your economic incentive.