How are lightning payments going to be taxed?

[Poker Player]

I've just watched this video:

BTC007: Bitcoin Disrupting Payment Clearing Houses w/ Jack Mallers

In the interview, Jack Mallers talks about various aspects of the lighting network but I want to focus on one:

According to him, with the lighting network you will be able to pay in any store either directly with your bitcoin, if the store implements the lightning network, or by converting instantly to cash with a visa if it does not accept it. The problem is that, according to him, because of recent regulations in the US, any store billing more than $3k a day will have to implement KYC as well.

He says that his company has an answer or solution in mind but has not wanted to disclose it yet.

If you pay for a coffee with a visa, having instantly converted your bitcoin to dollars, in theory you could be charged for capital gains. Let's say you bought the bitcoin at $30k and when you pay it's $40k. The IRS could tax you for the capital gain in proportion to the amount. If you pay with bitcoin the same. I understand that, even if you don't actually convert it to fiat, the state will make you pay fees in an equivalent manner.

This can be a big mess if you have to pay capital gains for every small payment.

I have searched if there were any threads opened about this but have not found anything.

If you pay at a small store that sells less than $3k a day you will maintain privacy, at least at first, but it seems that to pay at Starbuck, McDonald's etc. will not be so.

[1715255050]

1715255050

[1715255050]

1715255050

[maculeth]

I've just watched this video:

BTC007: Bitcoin Disrupting Payment Clearing Houses w/ Jack Mallers

In the interview, Jack Mallers talks about various aspects of the lighting network but I want to focus on one:

According to him, with the lighting network you will be able to pay in any store either directly with your bitcoin, if the store implements the lightning network, or by converting instantly to cash with a visa if it does not accept it. The problem is that, according to him, because of recent regulations in the US, any store billing more than $3k a day will have to implement KYC as well.

He says that his company has an answer or solution in mind but has not wanted to disclose it yet.

If you pay for a coffee with a visa, having instantly converted your bitcoin to dollars, in theory you could be charged for capital gains. Let's say you bought the bitcoin at $30k and when you pay it's $40k. The IRS could tax you for the capital gain in proportion to the amount. If you pay with bitcoin the same. I understand that, even if you don't actually convert it to fiat, the state will make you pay fees in an equivalent manner.

This can be a big mess if you have to pay capital gains for every small payment.

I have searched if there were any threads opened about this but have not found anything.

If you pay at a small store that sells less than $3k a day you will maintain privacy, at least at first, but it seems that to pay at Starbuck, McDonald's etc. will not be so.

it seems that the tax regulations for each country are different. because what I know in my country, you know Bali? there was a coffee shop that used the payment feature using bitcoin, but now it's still open or not, I don't know. what is clear, there is no tax deduction at all. customers who buy there only pay as usual as fiat ..

[Poker Player]

it seems that the tax regulations for each country are different. because what I know in my country, you know Bali? there was a coffee shop that used the payment feature using bitcoin, but now it's still open or not, I don't know. what is clear, there is no tax deduction at all. customers who buy there only pay as usual as fiat ..

Yes, well, in this case, Jack Mallers was referring to the United States. Anyway, I think the tendency of all governments around the world is to want to control all payments, absolutely all of them, and to charge taxes for it. Now maybe it's a little complicated yet but it's an information technology issue.

[figmentofmyass]

If you pay for a coffee with a visa, having instantly converted your bitcoin to dollars, in theory you could be charged for capital gains. Let's say you bought the bitcoin at $30k and when you pay it's $40k. The IRS could tax you for the capital gain in proportion to the amount. If you pay with bitcoin the same. I understand that, even if you don't actually convert it to fiat, the state will make you pay fees in an equivalent manner.

This can be a big mess if you have to pay capital gains for every small payment.

the IRS doesn't mind a big mess. the more complicated these transactions are, the more likely you are to violate the tax code. then they collect fines and penalties.

if you go by the book, the tax implications are a massive deterrent from spending crypto. absolutely! it's gonna suck once KYC becomes more integrated. i'm praying the $3k threshold for KYC on domestic transactions is upheld because they're proposing to lower the international threshold to $250. https://www.fincen.gov/news/news-releases/agencies-invite-comment-proposed-rule-under-bank-secrecy-act

that's insanely low and i reckon it's partially intended to make this sorta tax avoidance difficult.

According to him, with the lighting network you will be able to pay in any store either directly with your bitcoin, if the store implements the lightning network, or by converting instantly to cash with a visa if it does not accept it. The problem is that, according to him, because of recent regulations in the US, any store billing more than $3k a day will have to implement KYC as well.

with the visa conversion method, the sending bank has all your KYC information. that seems like it should be sufficient, but what do i know?

[odolvlobo]

I am not an expert, but it seems to me it would be reasonable to claim that all transactions on a Lightning channel are not realized until the channel is closed. That is when you find out the actual amount transacted, plus how else do you account for transactions in which you are just an intermediary?

If that is the case, then Lightning makes taxes on cryptocurrency transactions much simpler.

[squatter]

I am not an expert, but it seems to me it would be reasonable to claim that all transactions on a Lightning channel are not realized until the channel is closed. That is when you find out the actual amount transacted, plus how else do you account for transactions in which you are just an intermediary?

If that is the case, then Lightning makes taxes on cryptocurrency transactions much simpler.

If you're updating channel state in exchange for money or goods and services, that's a difficult legal argument to make. Gains and losses are obviously being realized when those state changes occur. I suspect that the IRS views value held on the Lightning Network as convertible virtual currency, just the same as bitcoins -- and subject to the same tax rules.