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Author Topic: Where to trade Bitcoin to USD bank deposits properly for mining company  (Read 149 times)
PeaMine
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June 15, 2018, 07:02:06 PM
 #1

I was curious, if you were to start a mining company just buying a bunch of miners and paying all the expenses of running them as well as maintaining them yourself, how should you go about this?
They are wanting to report it on their taxable income, and claim the miners and electric as expenses.
Everything should be as legit as possible.
My first thought was Coinbase, but it seems there is a lot of debate going on about major exchanges currently.
They also might want to eventually run a website allowing bitcoin payments to a wallet and holding but eventually cashing in as well.
Thanks for all the help!

Datacenter Technician and Electrician.  If you have any questions feel free to ask me as I am generally bored looking at logs and happy to help during free time.
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June 16, 2018, 01:00:50 PM
Merited by PeaMine (2)
 #2

This year's trend is the registration of cryptocurrency business in Malta. Maybe you need to explore business opportunities in this country. I also heard that there is a very loyal legislation in Estonia. You can obtain Estonian e-citizenship via the Internet and start your own business in this country.
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June 16, 2018, 02:45:45 PM
Last edit: June 16, 2018, 03:00:51 PM by PeaMine
 #3

Thanks! Is it not a wise move currently to register a mining operation with the US, in the US?
I believe they were mostly curious about which exchange to use so they can pay for electricity with some of the mining revenue coins.
I assume with the e-certification, you would then open up with an EU based exchange of your choosing?
Though in the US you still need to report income the same way and be taxed on it the same way by doing this, so perhaps we are missing something on why this method if preferred.

"E-residents will have their financial footprint monitored digitally, in a manner stated to be transparent; ... E-residency itself does not have an effect on income taxation — neither does it establish an income tax liability in Estonia nor does it relieve from income taxation in the resident's home country"

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June 16, 2018, 03:15:16 PM
 #4

If I was mining a significant amount I'd have an ongoing OTC deal with someone. There's lots of OTC demand and miners are one of the most dependable sources of coins. Both parties in the deal have a need they're fulfilling.

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June 16, 2018, 10:04:33 PM
Merited by PeaMine (1)
 #5

This year's trend is the registration of cryptocurrency business in Malta. Maybe you need to explore business opportunities in this country. I also heard that there is a very loyal legislation in Estonia. You can obtain Estonian e-citizenship via the Internet and start your own business in this country.

Not a great advise if OP only wants to buy few miners and operate them from home (US?). Especially when IRS don't care where you live/operate, you still have to file tax return with them.

For the simple type of operations (i.e. you're not selling hashpower to the public), I'd go with the simplest business model, ie. sole trader (sole proprietorship), which is enough to allow for operational expenses.

As for exchanges/cashing out - I'd definitely sign up (and full-verify) with at least 2 of them, just to have a back up if one decides to freeze your account + get a dedicated bank account for that purpose.

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June 17, 2018, 01:33:56 AM
Last edit: June 17, 2018, 01:45:40 AM by PeaMine
 #6

Thanks for the advice, the amount they are starting with is around 40 S9 or similar, OTC cash would be flagged by the bank in no time, correct?
Especially after a few years and with such an electric bill.
Registering the business overseas legally would be interesting as mentioned above, but not fully sure how it would be beneficial on this type of setup since the methods explained would not affect taxable income or tax rate to my knowledge.

Renting excess space at shipping and freight storage buildings are a great deal for starting up a mining operation just an FYI I learned.
Find a place with decent temperatures and some form of venting.
Shop around for business contracts with the electric company and offer to pay a large install fee if the rate isn't good.  You can usually get 0.067/kwh electricity year round and lengthy contracts, no extra fees.
If you are doing everything by the books, you can then also write off the electricity and miners on your taxable income, making the effective rate 25-45% less or an easy 0.05/kwh
Seems to us that makes the most sense?

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June 17, 2018, 09:37:20 PM
Merited by PeaMine (1)
 #7

... OTC cash would be flagged by the bank in no time, correct?
Especially after a few years and with such an electric bill.
Registering the business overseas legally would be interesting as mentioned above, but not fully sure how it would be beneficial on this type of setup since the methods explained would not affect taxable income or tax rate to my knowledge.
...

If it's your first business, then definitely try to keep it simple and don't overdo it with unnecessary foreign bank accounts and registrations. It's counterproductive and suspicious as hell.

If you intend to mine from US - register in US. If there's few people involved, start a simple partnership company (LLC?), if you're not familiar with it, get some business formation service agents involved to guide you through it.

Go to your local bank, ask for business account options, have a chat with manager, explain honestly what type of business you intend to start and whether there's a risk of bank flagging such operations. If the monthly costs are cheap, or none, open accounts with 2 different banks, just in case.

When you have your company registered + active bank account, then proceed to open accounts on 2-3 major btc/fiat exchanges that allow corporate customers - it costs nothing to open such account and you can just test which one is best for you.

...
Renting excess space at shipping and freight storage buildings are a great deal for starting up a mining operation just an FYI I learned.
...
Just make sure 1- you'll have an easy access to your miners, if something goes wrong, 2- facility management are aware of the heat/noise your miners will be generating, 3- get the legal terms agreed (insurance, liability).

...If you are doing everything by the books, you can then also write off the electricity and miners on your taxable income, making the effective rate 25-45% less or an easy 0.05/kwh
...

You can write-off pretty much every costs and pay tax only on the actual profit, but I don't see how does that make electricity effectively 24-25% cheaper. It doesn't.

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PeaMine
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June 18, 2018, 04:46:10 PM
 #8

Thanks! That is what I was advising them of doing as well, sticking with all US businesses for accountability reasons.
Just wondering if Coinbase is a good choice as a starter, or which others are trusted by the community?
For legit legal bank deposits for paying electricity.
I use to love Poloniex, but they have done some very shifty stuff past few months.
Then my previous 2 exchanges were "hacked".
So I personally don't have anything to vouch on, only against.

I'm not much of an expert on this part.
For saving money via writing off electricity, I see your point; I guess I was comparing something similar to a home miner paying the electric bill out of reported income from mining, regardless of size, but not being able to report their personal electric bill as an expense.
In this case, they miss out on being able to write off that electric cost as a taxable income deduction, but then pay taxes on coins converted to USD correct?

They were originally thinking of trying to run this out of their house and yard, which for safety reasons and power grid and cost reasons is just a bad idea.  Plus no room to expand, noise, heat, etc.


Datacenter Technician and Electrician.  If you have any questions feel free to ask me as I am generally bored looking at logs and happy to help during free time.
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June 18, 2018, 05:02:16 PM
 #9

OTC cash would be flagged by the bank in no time, correct?

As would money from anywhere else. The point of OTC is to get better service when selling as it'll be personalised. With an exchange you're just another ticket number if things get screwy.

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June 19, 2018, 08:41:33 PM
 #10

OTC cash would be flagged by the bank in no time, correct?

As would money from anywhere else. The point of OTC is to get better service when selling as it'll be personalised. With an exchange you're just another ticket number if things get screwy.

Thanks, that is a very good point.
But most OTC seem to usually charge a much higher percent than exchanges, around 3-9% more correct?
Though the realistic "fee" of using online exchanges would be about this for someone such as myself who had a "hacked" exchange run off with hundreds of dollars worth of coins, but perhaps for very large miners it might be better to have the lowest rate possible.
I personally have learned to never leave more than you care to lose on an exchange, so I recommended they use a secured home wallet then only send when they need to pay.
They're wanting the convenience of being able to do all payments online.



Datacenter Technician and Electrician.  If you have any questions feel free to ask me as I am generally bored looking at logs and happy to help during free time.
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June 19, 2018, 08:46:47 PM
 #11

But most OTC seem to usually charge a much higher percent than exchanges, around 3-9% more correct?

Nowhere near that. The highest I've seen is 5% in the UK and I can't imagine they get much business. A competitor charges 0.5%.

Genesis Trading is one of the biggest and they don't have a fee at all. They'll make money on the spread.

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June 19, 2018, 09:21:51 PM
 #12

But most OTC seem to usually charge a much higher percent than exchanges, around 3-9% more correct?

Nowhere near that. The highest I've seen is 5% in the UK and I can't imagine they get much business. A competitor charges 0.5%.

Genesis Trading is one of the biggest and they don't have a fee at all. They'll make money on the spread.

I don't think I've seen any OTC in the US with those rates.  Most ATMs for example are close to 4-10% and 4% requires usually 10k+ at once.

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June 19, 2018, 09:26:05 PM
 #13

It depends. How many transactions a month? What volume?
If you plan to make 10 or 500 BTC a year, the answer will not be the same...

If the yearly income is below $50,000, and if you're smart, I would suggest not to declare anything to anyone. That's what I would do, but then I've always been a bad taxpayer.

If you're looking for a trading/lending place,
better avoid Poloniex, as it socializes losses.
Learn more about it on this topic.
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June 20, 2018, 02:56:32 AM
 #14

Thanks for the feedback.

I think they are wanting to declare whatever they make regardless, so mostly interested in exchanges that are good for the Bitcoin community and trust worthy.

They will be holding a certain percentage as well in an offline wallet plus investing in expansions.

Datacenter Technician and Electrician.  If you have any questions feel free to ask me as I am generally bored looking at logs and happy to help during free time.
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June 21, 2018, 08:51:53 AM
Merited by PeaMine (1)
 #15

...
Just wondering if Coinbase is a good choice as a starter, or which others are trusted by the community?
For legit legal bank deposits for paying electricity.
I use to love Poloniex, but they have done some very shifty stuff past few months.
...

Poloniex is crypto-only exchange, so no good anyways, they don't support US$ withdrawals (USDT is not USD).

Yeah, I'd probably give Coinbase a try + Kraken + BitStamp + maybe Gemini. I believe all of them support business accounts. Being registered/verified with few exchanges lets you test in practice and see which one is the smoothest/fastest/cheapest + lets you choose the best rate at the time + opens up arbitrage trading opportunity.

...
If the yearly income is below $50,000, and if you're smart, I would suggest not to declare anything to anyone. That's what I would do, but then I've always been a bad taxpayer.

I appreciate your anti-system sentiment, but this advice is pretty stupid and definitely don't belong in 'Legal' section. Getting ~50k regular annual income unlikely would go unnoticed in the long run (unless you want to bury your cash in the garden) so would require OP to do money laundering.

 

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June 21, 2018, 09:26:31 AM
 #16

I was curious, if you were to start a mining company just buying a bunch of miners and paying all the expenses of running them as well as maintaining them yourself, how should you go about this?
They are wanting to report it on their taxable income, and claim the miners and electric as expenses.
Everything should be as legit as possible.
My first thought was Coinbase, but it seems there is a lot of debate going on about major exchanges currently.
They also might want to eventually run a website allowing bitcoin payments to a wallet and holding but eventually cashing in as well.
Thanks for all the help!
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