Does Bittrex report to the IRS?

[erk]

AML/KYC regulations. The issue isn't taxation, but money transmission. Chairman of the SEC, Jay Clayton, made that clear in a statement last month:

As I have stated previously, these market participants should treat payments and other transactions made in cryptocurrency as if cash were being handed from one party to the other.

US money transmiters fall under the jurisdiction of the Bank Secrecy Act, which requires KYC. The exact requirements (for example, whether SSN is really required) aren't clear to me. But it seems like Bitcoin exchanges are increasingly seen as "financial institutions":

The BSA requires financial institutions to engage in customer due diligence, or KYC, which is sometimes known in the parlance as know your customer. This includes obtaining satisfactory identification to give assurance that the account is in the customer's true name, and having an understanding of the expected nature and source of the money that flows through the customer's accounts.

Where, in US law, does it say that an exchange like Bittrex which doesn't deal in fiat, is classified as a "money transmitter" ?

[Samarkand]

...
 
Maybe to keep it simple, the IRS would simply accept bitcoin or other cryptocurrencies for paying taxes.
 

You really think that they would give any cryptocurrency the status of "legal tender"?
I don´t think they will do that, because that would increase the legitimacy of cryptocurrencies
extremely.

I know that certain Swiss municipalities allow the paying of taxes with Bitcoin, but even there
it is only a test run and limited to an amount like roughly 200 €. You can imagine that the IRS
will never accept it if even progressive Swiss municipalities don´t allow it for non-negligible amounts.

[MtRev]

I'm just confused by the new tax law. If every trade is taxable how in the world are day traders going to keep track of every single trade? They want it at USD price too.

[1Referee]

I'm just confused by the new tax law. If every trade is taxable how in the world are day traders going to keep track of every single trade? They want it at USD price too.

Every trade is taxable in theoretical sense. What matters here is that you declare your holdings and profits at each new tax year as totalling number. If you are a senior day trader and have like 50 trades per day on average, which means 365x50=18,250 trades per year, it doesn't mean that you have to declare all your 18,250 trades. You just declare your total holdings and profits for that year in fiat terms, and done you are. If you made profit, you pay tax over your wealth and profits, and if you didn't make any profits, you just pay tax over what's left of your holdings. The only occasion where the trades in particular may matter, is when the IRS doesn't trust your tax reports, and thus you have to come up with evidence.

[MtRev]

That's what I thought at first until a friend sent me this video:
https://www.youtube.com/watch?v=q5VCq3pX3ys

Now i'm not sure what to believe and my accountant has no idea how to go about it.

[exstasie]

Where, in US law, does it say that an exchange like Bittrex which doesn't deal in fiat, is classified as a "money transmitter" ?

The relevant laws are published here:
https://www.law.cornell.edu/cfr/text/31/1022.380
https://www.law.cornell.edu/cfr/text/31/1010.100

(5)Money transmitter -

(i)In general.

(A) A person that provides money transmission services. The term “money transmission services” means the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means. “Any means” includes, but is not limited to, through a financial agency or institution; a Federal Reserve Bank or other facility of one or more Federal Reserve Banks, the Board of Governors of the Federal Reserve System, or both; an electronic funds transfer network; or an informal value transfer system; or

(B) Any other person engaged in the transfer of funds.

If USDT isn't "value that substitutes for currency" then I don't know what is. According to Tether LTD, each USDT is backed by one USD held in reserve by Tether LTD, and may be redeemed as such. Further, the SEC has stated that their interpretation of the law is that cryptocurrency transactions should be treated as cash transactions. Bittrex allows deposit/withdrawal/exchange among different users in both a USD derivative and cryptocurrency. So, the bold sections seem to imply they are a money transmitter.

Clearly Bittrex's legal team believes they are a money services business, since they registered as one with FINCEN. That's an open admission that they feel required under the BSA (and related laws) to perform KYC among other AML requirements.

Whether or not you agree with their legal interpretation, that's why they require KYC.