[2018-05-20] How Bitfinex’s Tax Requirement May Have Contributed to the Bitcoin

[Psicotico]

On May 17, one of the world’s largest cryptocurrency and bitcoin exchange Bitfinex officially asked its users to submit tax IDs and social security numbers that could be utilized by government agencies in the countries its users are based into tax gains recorded in the cryptocurrency market.

“We request that you complete the appropriate self-certification form and upload it to your Bitfinex account by May 24, 2018, at the latest. If you are a US person or an entity with at least one 25 percent owner who is a US person, please complete the appropriate FATCA form. You are required to provide us with such information,” said Bitfinex.
Targeted Users

Whalepool, a community of day traders focused mainly on bitcoin and other cryptocurrencies on Bitfinex, emphasized that they strongly disavow the decision of Bitfinex and have withdrawn their funds from the exchange.

“Bitfinex is now requiring users to give their tax information so that it can send it to BVI which will exchange it with your country’s tax authorities. We strongly disavow. If you also disagree with this decision, peacefully protest it by withdrawing your money from Bitfinex,” the Whalepool team said.

In response to the statement of Whalepool, the Bitfinex team noted that it has “deliberately targeted users” that it believes have an obligation to self-disclose and emphasized that only a portion of the Bitfinex user base was asked to disclose their tax identification and personal information.

In some regions like the US and France, capital gains tax on cryptocurrency investment is quite substantial. Until this month, the gains tax imposed on cryptocurrency trading was 45 percent, which was decreased to 19 percent by France’s Council of State because investors were not willing to disclose their earnings just to be taxed 45 percent.

In consideration of the high capital gains tax imposed on cryptocurrency trading, it is understandable that investors in the global cryptocurrency market try to avoid disclosing their tax IDs and prevent from being forced to pay abnormally large taxes on trades.

The abrupt decision of Bitfinex led the cryptocurrency market and investors that trade the bitcoin-to-USD, which is still the majority of investors in the market, to panic sell and withdraw their funds out of Bitfinex.

According to CryptoCompare, a cryptocurrency market data provider, Bitfinex remains as the biggest bitcoin-to-USD exchange with more than 29 percent of the market share.

Bitcoin Price Falls

The period in which Bitfinex sent out its official statement to its clients coincided with the fall in the price of bitcoin on May 17, when the bitcoin price reached a two-month low at $7,925. It is highly likely that the price drop of bitcoin was largely caused by Bitfinex and the sell-off of investors on the platform trading the bitcoin-to-USD pair.

The cryptocurrency market still remains extremely volatile. Over the past 24 hours, the daily trading volume of the cryptocurrency market has dropped $5 billion, from $21 billion to $16 billion. As such, it is possible that the bitcoin price falls further below from the current rate at $8,320. But, given that the market has already started to recover from the May 17 dip, it is likely that the bitcoin price rebounds soon, along with other major cryptocurrencies and tokens.

https://www.ccn.com/how-bitfinexs-tax-requirement-may-have-contributed-to-the-bitcoin-price-correction/

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[1Referee]

Bitfinex is an exchange that should be avoided regardless of these measures. To add; every time the price drops, the media tries to link it to whatever event, which is pathetic.

Let's sum up the media linked events that caused the price to drop according to them;

- China's sanctions.
- South Korea's sanctions.
- Japan's sanctions.
- Thailand's sansctions.
- Russia's sanctions.
- SEC's sanctions.
- RBI's sanctions.
- Facebook's ad ban.
- Google's ad ban.
- Twitter's ad ban.
- Bing's ad ban.
- CEO's speaking against Bitcoin.
- Tether forming a threat.
- Ethereum becoming a security.

And so forth. There is probably more to add, but can't remember because there are too many.

With all that in mind it's a near miracle we haven't tanked back to single digit figures.

[d5000]

Another pretty lame "justification" for a simple, totally normal market downmove.

The period in which Bitfinex sent out its official statement to its clients coincided with the fall in the price of bitcoin on May 17, when the bitcoin price reached a two-month low at $7,925. It is highly likely that the price drop of bitcoin was largely caused by Bitfinex and the sell-off of investors on the platform trading the bitcoin-to-USD pair.

Let's say I'm a big cryptocurrency trader wishing to hide my coins and my trading activity, why would I buy fiat (or "sell BTC for fiat") and try to get it paid out with a bank wire, disclosing my personal data? It would make much more sense to withdraw Bitcoin and transfer them to another, more "anonymous" exchange. But oh, then I have to buy Bitcoin, not to sell it! How is this compatible with this supposed price fall?

Additionally, the Bitcoin price was already falling for some days.

[aso118]

Theoretically, people may be able to evade crypto currency gains by sticking to exchanges with low KYC standards. But they cannot do this forever as they have to convert to fiat at some point. So all this talk about higher KYC requirements causing a drop in price is unfounded.

[richardsNY]

Theoretically, people may be able to evade crypto currency gains by sticking to exchanges with low KYC standards.

That's not a viable option long term speaking. I am quite sure that within 2 years the entire centralized crypto ecosystem consisting of exchanges will handle similar policies. It's a simple matter of governments taking what they consider is their cut of the pie -- if you don't give the government what they deserve (from their perspective), they will come and get it from you. It's just another push towards completely decentralized exchanges, and I think we should thank the regulations for that. It will speed up the developments that would otherwise take probably years and years. Bitfinex is a large exchange measured by volume, but they aren't the only large exchange making the market, so there is no reason why them initiating slight dumps will cause the overall market to decrease....

[figmentofmyass]

On May 17, one of the world’s largest cryptocurrency and bitcoin exchange Bitfinex officially asked its users to submit tax IDs and social security numbers that could be utilized by government agencies in the countries its users are based into tax gains recorded in the cryptocurrency market.

this is pretty misleading. it makes it sound like they are requiring tax IDs from all users. they responded to that assertion:

We have not sent this message to all users. We have deliberately targeted users that we believe have an obligation to self-disclose. If a user has _not_ received a message from us, she need _not_ self-certify anything to us at this time.

Bitfinex is an exchange that should be avoided regardless of these measures.

yeah, i avoid bitfinex like a plague, though they were my main exchange a few years back. the US subpoenas, the tether funny business, the long term banking delays, the recent polish government seizure which is believed to have ties to bitfinex...... the list goes on.

[aso118]

Theoretically, people may be able to evade crypto currency gains by sticking to exchanges with low KYC standards.

That's not a viable option long term speaking. I am quite sure that within 2 years the entire centralized crypto ecosystem consisting of exchanges will handle similar policies. It's a simple matter of governments taking what they consider is their cut of the pie -- if you don't give the government what they deserve (from their perspective), they will come and get it from you. It's just another push towards completely decentralized exchanges, and I think we should thank the regulations for that. It will speed up the developments that would otherwise take probably years and years. Bitfinex is a large exchange measured by volume, but they aren't the only large exchange making the market, so there is no reason why them initiating slight dumps will cause the overall market to decrease....

That is correct, which is why I said tax evasion cannot continue forever. I do not believe that identification requirements will converge across exchanges - there will be crypto-only exchanges in lightly regulated exchanges. But they will be useless to cash out large amounts in fiat.

[buwaytress]

With all that in mind it's a near miracle we haven't tanked back to single digit figures.

I was thinking the same myself for the longest time, ever since the doomsday prophecies of Bitcoin forks back starting back in July last year, that we're all holding on white-knuckled, and yet breathing easily. Threat after threat has been dealth with, the tech and community have been shaken but not defeated, and the markets have backed it up with solid prices in the midst of adversity.

Bitcoin's resilience is nothing short of incredible - all these minor dips and "crashes" I don't think any longer are FUD impacts, simply natural forces in a market that's really in a league of its own.