Why am I reporting this to you all?A May 2017 report by Cambridge Centre for Alternative Finance [1][2] claims that “More than 3 million people…” were active cryptocurrency users. Coinbase, one of the biggest and most known Cryptocurrency sellers claims a user base of 10 Million plus! [3]. What ever the true figure is, with the growth of Cryptocurrency, came the increased hunger of the Government to step in and enforce regulations. This fight for regulation is still on going both internally within the Crypto-community, by it’s Developers, Proponents and Investors as well as from without by the Government, It’s regulatory Committees & Agencies and Opponents of this new economic shift.
As of the writing of this post, the global market cap is over $330 Billion [4]. So it’s no shock that Governments are seeking ways to ste…uh… “Tax” this massive amount of money. With regards to United States taxes, a new bill was submitted titled “S. 1241 — Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017” [5]. Now, I’m by no means a tax expert, and I would be lying to say I fully understood all of which was expressed in this bill, but Section 13. Prepaid access devices, digital currencies, or other similar instruments is of importance to us as it covers Cryptocurrencies.
What does S. 1241 Section 13 state?First, it Amends Section 5312(a) of title 31, United States Code [6] (U.S Code > Title 31 > Subtitle IV > Chapter 53 > Subchapter II > § 5312). The first amendment is to Paragraph (2)(K)
(2) “Financial institution” means — Before the Amendment (it reads)
(K) an issuer, redeemer, or cashier of travelers’ checks, checks, money orders, or similar instruments
After the Amendment (it reads)
(K) an issuer, redeemer, or cashier of travelers’ checks, checks, money orders, prepaid access devices, digital currency, or similar instruments, or any digital exchanger or tumbler of digital currency;
The second amendment is to Paragraph (3)(B)
(3)
“monetary instruments” means —
Before the Amendment (it reads)
(B) as the Secretary may prescribe by regulation, coins and currency of a foreign country, travelers’ checks, bearer negotiable instruments, bearer investment securities, bearer securities, stock on which title is passed on delivery, and similar material; and
After the Amendment (it reads)
(B) as the Secretary may prescribe by regulation, coins and currency of a foreign country, travelers’ checks, bearer negotiable instruments, bearer investment securities, bearer securities, stock on which title is passed on delivery, prepaid access devices, and similar material; and
[[[The amendment states that the following is added to the amendment….]]]
‘prepaid access device’ means an electronic device or vehicle, such as a card, plate, code, number, electronic serial number, mobile identification number, personal identification number, or other instrument, that provides a portal to funds or the value of funds that have been paid in advance and can be retrievable and transferable at some point in the future. Now, What does this all potentially mean?Again, I am no tax expert, nor am I a law expert but I will give my perception of the above. If I am wrong, please by all means, shoot me a message and I will gladly amend the post in a follow up after I can research the suggested changes to this document.
Amendment to paragraph (2)(K) sounds as if it covers Preloaded Paper wallets (Prepaid access devices), Exchanges or Coin-Swaps {Coin-Swaps such as “Coin Spot” [7]} (Digital Exchanger) and of course Tumblers. This all says to me, that KYC (Know Your Customer) is going to be something we all begin seeing in legitimate exchanges and crypto services. I wouldn’t even be surprised to see ICO’s start this with their White-listing processes.
Amendment to paragraph (3)(B) seems to give weight to my assumption as it specifically states “Code, Number” to me I think this will be applied to Private Keys as well as Public Keys. Now how exactly will they go about enforcing this? I am not sure, as I have not completed the entire S. 1241. Either way, this to me seems to be a very important subject and topic we all need to keep an eye upon as this could very well remove any and all privacy from the Cryptospace.
One other thing that catches my eye, if you go over the table of contents in S. 1241 let me direct your eyes to the following sections…
Sec. 18: Prohibition on concealment of ownership of account.
Sec. 19: Prohibition on concealment of the source of assets in monetary transactions.This may be covered in a follow up to this posting, but those 2 section titles alone says to me that coins which are focusing on Privacy are not going to be around long. Well at least not in an official and legal capacity as this bill sounds as if it wants to completely strip the anonymity of Crypto usage, purchases and sells.
REFERENCES [1]
http://www.cam.ac.uk/research/news/study-highlights-growing-significance-of-cryptocurrencies [2]
https://www.jbs.cam.ac.uk/faculty-research/centres/alternative-finance/publications/global-cryptocurrency/#.WqsDUucpCM8 [3]
https://www.coinbase.com/about?locale=en-US [4]
https://coinmarketcap.com/ [5]
https://www.congress.gov/115/bills/s1241/BILLS-115s1241is.pdf [6]
https://www.law.cornell.edu/uscode/text/31/5312
