Will I get in trouble with Circle, Coinbase, or my bank?

[MJS_gold]

I've recently begun buying bitcoins through the Coinbase GDAX exchange and selling somewhat smaller quantities of bitcoin through Circle.    Since the Circle sale price for small amounts of BTC (i.e., around 1.0 BTC) is usually close to 1% higher than the last GDAX trade price, I am making a few bucks from this arbitrage opportunity (while also accumulating BTC).   I have been using one bank account to transfer USD to Coinbase and a different bank account to receive USD from my Circle sells.    Am I asking for trouble from one or more of these companies?  Any recommendations to avoid problems?

Should I avoid sending BTC from Coinbase/GDAX directly to my Circle wallet?  Does Circle know where my BTC came from? 

[1714142334]

1714142334

[gadman2]

In the US you will need to pay applicable taxes on profits. Keep sound records of all trades, profits and losses.

[MJS_gold]

In the US you will need to pay applicable taxes on profits. Keep sound records of all trades, profits and losses.

I have kept records of my GDAX and Circle buys and sells, but I did neglect to keep records of when I used BTC to buy Amazon products using PurseIO.  I'm guessing those PurseIO purchases of Amazon products are also considered taxable asset sales?

If we use BTC to directly buy goods and services and our BTC has increased in value relative to USD (or relative to the local fiat currency if we are in another country), do we have to pay a federal currency appreciation tax in addition to local sales taxes?  

[BitcoinNewsMagazine]

I've recently begun buying bitcoins through the Coinbase GDAX exchange and selling somewhat smaller quantities of bitcoin through Circle.    Since the Circle sale price for small amounts of BTC (i.e., around 1.0 BTC) is usually close to 1% higher than the last GDAX trade price, I am making a few bucks from this arbitrage opportunity (while also accumulating BTC).   I have been using one bank account to transfer USD to Coinbase and a different bank account to receive USD from my Circle sells.    Am I asking for trouble from one or more of these companies?  Any recommendations to avoid problems?

Should I avoid sending BTC from Coinbase/GDAX directly to my Circle wallet?  Does Circle know where my BTC came from? 

Both Circle and Coinbase know what you are up to. I took a look at both TOS and arbitrage is not prohibited. In fact Circle states:

You can use your Circle account to buy bitcoin for sale on other registered platforms and exchanges or to sell bitcoin acquired from other registered platforms and exchanges. You cannot use your Circle account to (i) buy bitcoin for sale to individuals through peer-to-peer brokerage services or unregistered exchanges (such as LocalBitcoins, Craigslist, eBay or similar websites), (ii) sell bitcoin that you have acquired directly from individuals through peer-to-peer brokerage services or unregistered exchanges (such as LocalBitcoins, Craigslist, eBay or similar websites), or (iii) buy or sell bitcoin on behalf of anyone else. Such activities might be in violation of federal and/or state law - so we can’t allow it.

You should be OK with Circle. I did not see any prohibitions in Coinbase terms of service but you should double check for yourself. However, Coinbase has closed accounts for no reason given before. Do you really want to take that chance for a few bucks?

[aso118]

I've recently begun buying bitcoins through the Coinbase GDAX exchange and selling somewhat smaller quantities of bitcoin through Circle.    Since the Circle sale price for small amounts of BTC (i.e., around 1.0 BTC) is usually close to 1% higher than the last GDAX trade price, I am making a few bucks from this arbitrage opportunity (while also accumulating BTC).   I have been using one bank account to transfer USD to Coinbase and a different bank account to receive USD from my Circle sells.    Am I asking for trouble from one or more of these companies?  Any recommendations to avoid problems?

Should I avoid sending BTC from Coinbase/GDAX directly to my Circle wallet?  Does Circle know where my BTC came from? 

Your bank *might* deem you to be a high risk customer, with respect to money laundering.
That would result in additional restrictions on your bank account.

[MJS_gold]

Thank you for your response.

Both Circle and Coinbase know what you are up to.

How do they know?

You should be OK with Circle. I did not see any prohibitions in Coinbase terms of service but you should double check for yourself. However, Coinbase has closed accounts for no reason given before. Do you really want to take that chance for a few bucks?

I do store a nice chunk of BTC in my Coinbase multisig vault; might that buy me some good will?  I have transferred most of the BTC that I purchase on GDAX to either my Coinbase wallet, my Coinbase multisig vault, my Electrum wallet, or a paper wallet.  I also made a couple of BTC transfers to my Circle wallet; was that a mistake?

[raphma]

well, that depends on the laws of your country.
from where i am, if it is all in my name and i'm paying my taxes properly, i'll not have any problems.

about arbitrage, it isn't illegal... coinbase shouldn't do nothing against it.

[JITENDERPAR3]

I've recently begun buying bitcoins through the Coinbase GDAX exchange and selling somewhat smaller quantities of bitcoin through Circle.    Since the Circle sale price for small amounts of BTC (i.e., around 1.0 BTC) is usually close to 1% higher than the last GDAX trade price, I am making a few bucks from this arbitrage opportunity (while also accumulating BTC).   I have been using one bank account to transfer USD to Coinbase and a different bank account to receive USD from my Circle sells.    Am I asking for trouble from one or more of these companies?  Any recommendations to avoid problems?

Should I avoid sending BTC from Coinbase/GDAX directly to my Circle wallet?  Does Circle know where my BTC came from? 

you are worried about rules by the government on you then you should keep all the transaction in written form and pay tax according to as get Profit or loss .
well tge transaction of about 1-2 btc per montg will not leads into the worried use honestly for good things .

[BitcoinNewsMagazine]

Thank you for your response.

Both Circle and Coinbase know what you are up to.

How do they know?

You should be OK with Circle. I did not see any prohibitions in Coinbase terms of service but you should double check for yourself. However, Coinbase has closed accounts for no reason given before. Do you really want to take that chance for a few bucks?

I do store a nice chunk of BTC in my Coinbase multisig vault; might that buy me some good will?  I have transferred most of the BTC that I purchase on GDAX to either my Coinbase wallet, my Coinbase multisig vault, my Electrum wallet, or a paper wallet.  I also made a couple of BTC transfers to my Circle wallet; was that a mistake?

Both companies use blockchain analysis tools to track transactions. As far as keeping bitcoin at Coinbase in the vault you would be better off using a hardware wallet like Ledger Nano S or Trezor to store it yourself. If you do not own the private keys, all you have from Coinbase is an IOU. The chance of a problem is slight, but why take a chance with your bitcoin?

[MJS_gold]

Your bank *might* deem you to be a high risk customer, with respect to money laundering.
That would result in additional restrictions on your bank account.

Thanks.  Fortunately, there are lots of (USD) banks with which to do business.   ...not so many BTC banks/exchanges though.   

[Kakmakr]

The purchases on Amazon should reflect the VAT implications, so you will be OK with that. It is the Capital gains or the profit you are making on the Arbitrage that you need to declare on your tax return. They might want to audit that in future, so just keep all records of that.

There are different regulations and limitations for each country, so in some countries you might not even have to pay tax on that income, if you earned low profits. ^smile^

[MJS_gold]

Both companies use blockchain analysis tools to track transactions. As far as keeping bitcoin at Coinbase in the vault you would be better off using a hardware wallet like Ledger Nano S or Trezor to store it yourself. If you do not own the private keys, all you have from Coinbase is an IOU. The chance of a problem is slight, but why take a chance with your bitcoin?

Would Circle's blockchain analysis be likely to detect whether or not some portion of the BTC that I transferred from an unknown address (my Electrum wallet) were purchased at Coinbase?  Would Coinbase likely discover that the BTC that I transferred to an unknown address (i.e., my Electrum wallet) were sent to Circle weeks later?   Coinbase would not be able to confirm the ownership of the Circle account that received the BTC (and visa versa), unless Coinbase and Circle conspire to spy on their customers by sharing information.   Do they need to do this to comply with U.S. regulations?

With the Coinbase multisig vault, I own two out of three private keys and can purportedly access my funds without using my Coinbase account.   Is there reason to believe this may not be the case?

[MJS_gold]

The purchases on Amazon should reflect the VAT implications, so you will be OK with that. It is the Capital gains or the profit you are making on the Arbitrage that you need to declare on your tax return. They might want to audit that in future, so just keep all records of that.

There are different regulations and limitations for each country, so in some countries you might not even have to pay tax on that income, if you earned low profits. ^smile^

Technically, I don't think I purchased Amazon products with bitcoin.  With the help of PurseIO, I transferred BTC to a peer who agreed to purchase Amazon products for me with fiat.  Still think the taxman will be OK with that? 

[Kevin77]

I think the best action to take is making yourself sure that all transactions you are making is clean within the ToS of both coinbase and Circle. Most of us will start using service without going through the term of service of the company and when we violate, we find ourselves in a big trouble.