BITCOIN WALLET

[o_e_l_e_o]

When it comes to Federal Courts, the Third Circuit Court of Appeals ruled that a defendant had to unlock multiple computers and devices.

So, this case is a little more nuanced than that.

If you read the court documents, you'll find that they specifically mention that the Eleventh Circuit found that the defendant should have their Fifth Amendment right against self-incrimination applied in such scenarios. The difference here is that the courts already knew what was on the encrypted hard drives (partly from testimony from another person and partly from records from the associated computer they were attached to), and they already had enough evidence from other sources to convict the individual in question. For those reasons, the court said that forcing the individual to decrypt the hard drives would not amount to self-incrimination since it would not change the outcome of the court case or their final ruling.

This scenario could potentially apply to bitcoin if law enforcement knew you had a bitcoin wallet and also knew the addresses in it, as unlocking it does not incriminate you any more. If you had a bitcoin wallet and they did not know which addresses were in it, could you argue for your Fifth Amendment rights? I don't know the answer to that.

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[Pmalek]

For those reasons, the court said that forcing the individual to decrypt the hard drives would not amount to self-incrimination since it would not change the outcome of the court case or their final ruling.

It's certainly interesting to think about. Imagine that the defendant was accused of embezzling 1000 BTC, but the actual number is much higher, 5000, for example. The court only knows and has evidence for the 1000 BTC. Providing them with access to the computer would be self-incriminating if they can obtain evidence for the remaining 4000 bitcoin. I wonder what would happen then.   

[o_e_l_e_o]

I wonder what would happen then.

Yeah, who knows? The courts themselves don't know until if and when such a case actually occurs, and even then I'm sure it would get bounced up through the chain of courts and appeals. In such a case where the defendant will be going to jail for embezzling $40 million anyway, would it make much difference if that number was actually found to be $200 million? Or would it make much difference if the defendant stuck to a story that they do not know the seed phrase/wallet password and so cannot reveal the true amount of bitcoin contained?

Anyway, to get somewhat back on topic, the safest wallet for you is going to be the one which protects best against the attack vectors which you deem most likely for you. If you honestly believe those attack vectors are from a three letter agency, then although a hardware wallet or encrypted airgapped wallet might prevent them from accessing your funds, you'll need to go to much greater lengths if you want to hide the existence of those funds altogether.

[Lucius]

Even though they may not sell millions, they still sell many. And I'd encourage that, instead of continuing to shill Ledger, 'it must be good because they sell many', because this shilling may be the exact reason why the others sell less than a million devices each.

I don’t shill Ledger so don’t make such accusations if you don’t have concrete evidence for it. I’m just talking about specific data that can be found online, and you’re guessing something based on your feelings. The fact that we are discussing something does not mean that we advise someone to buy it, on the contrary - we warn of all the bad features or omissions that these companies have made over the years.

Actually, I don't even understand your point or opinion, starting here:

Unfortunately, there is no other manufacturer that has managed to impose itself as an adequate alternative to Ledger or Trezor if we take into account everything that happened to Ledger, but also the irreparable vulnerability that was discovered on Trezor

You are trying to say that there are no good alternatives to Trezor and Ledger, because they have security bugs and bad customer data handling? How does this make sense? Exactly because these wallets have flaws, we should look at the alternatives..

You completely misunderstood what I meant - I'm just saying that despite all the bad things surrounding the two most famous HW manufacturers, no other company has emerged to offer a product that would become the killer of Ledger&Trezor. This does not mean that there are no alternatives, as I have already written, let everyone decide which device is best for him - and after all hardware wallets are an alternative in themselves - there are many other ways to store cryptocurrencies, and some may be safer than any HW.

[n0nce]

Anyway, to get somewhat back on topic, the safest wallet for you is going to be the one which protects best against the attack vectors which you deem most likely for you. If you honestly believe those attack vectors are from a three letter agency, then although a hardware wallet or encrypted airgapped wallet might prevent them from accessing your funds, you'll need to go to much greater lengths if you want to hide the existence of those funds altogether.

Only issue with super well hidden and anonymous funds, especially if there is no three-letter agency behind your ass: there will be a point in time where you'll want to spend those millions and then it may be hard to argue where that money came from. This is why I have this bookmarked:

You should never delete a wallet.

By keeping the private keys, you can always prove you just bought the BTC in a point in time when you were able to afford them.
However, you'll have evaded wealth tax for years in case you lived in a country collecting such a tax. This might put you into jail.
So it's tricky to hold funds completely secretly, without landing in jail! Everyone should make sure to consider this.

[o_e_l_e_o]

However, you'll have evaded wealth tax for years in case you lived in a country collecting such a tax.

If it's several million dollars worth you are talking about, then that is more than enough money to easily migrate to a country with more friendly bitcoin laws if you are concerned about a wealth tax.

I wonder what has happened in scenarios where people have lost access to their wallets or keys for a number of years (and therefore not paid wealth tax since they don't technically own that money) before managing to recover them, find an old back up, brute force them with newer technology, etc. Have tax authorities gone after them for historical wealth taxes?

[n0nce]

However, you'll have evaded wealth tax for years in case you lived in a country collecting such a tax.

If it's several million dollars worth you are talking about, then that is more than enough money to easily migrate to a country with more friendly bitcoin laws if you are concerned about a wealth tax.

Yup, for sure, but they should keep this in mind before mindlessly cashing out in their current country is what I'm saying..

I wonder what has happened in scenarios where people have lost access to their wallets or keys for a number of years (and therefore not paid wealth tax since they don't technically own that money) before managing to recover them, find an old back up, brute force them with newer technology, etc. Have tax authorities gone after them for historical wealth taxes?

That's an interesting scenario. If we try to translate it to a pre-crypto scenario, it would be something like losing a bag of gold coins, then finding another equal sized one in your garden years later for example. It should be handled the same way with lost wallet / wallet password. It's hard to prove that you don't have a backup somewhere, though. I would argue it's impossible to prove there is no backup in some drawer. So in the end it would depend on your law: if it's your burden to prove you don't own something or if it's the authorities' burden to prove you do. I'm not a lawyer and have no idea how this is handled in any country, but it would be interesting to know.

[o_e_l_e_o]

-snip-

It is of course impossible to prove the non-existence of anything. I can't prove that dragons aren't real, and I can't prove that I lost the only copy of all my private keys and seed phrases in a tragic boating accident. No reasonable court would say "Prove you have forgotten the password" or "Prove you don't have the seed phrase backed up somewhere", because it is impossible to do so.

In the US, loss of property (which is what bitcoin is classed as) can only be deducted from your taxes when it is caused by a federally declared disaster. So forgetting your wallet password or failure of your hard drive absolutely would not count. Now, the US doesn't have a wealth tax (at least, not yet!), but for the sake of capital gains taxes, losing your bitcoin wallet means nothing for the taxes you owe. It would seem particularly cruel to continually charge someone a wealth tax on money they can't access however, perhaps without which they would be well below the threshold and making them pay out from their regular income.

I did also find this document from the OECD:

The possibility of losses or theft of a virtual currency gives rise to a number of questions from a tax perspective. Should a loss or theft be treated as a disposal (and capital loss) for the taxpayer? Are lost tokens able to be deducted from the value of an inheritance? There is very little guidance available on how these events should be treated for tax purposes and approaches differ in the few countries providing guidance. For example, in the case of loss or theft of a crypto-asset in Australia, the owner may claim a capital loss, provided they are able to present the evidence of their ownership. In the United Kingdom, theft is not considered to be a disposal and Her Majesty’s Revenue and Customs (HMRC) considers that the individual continues to own the asset. Similarly, the loss of a private key is not considered a disposal, but a taxpayer can apply to have the loss recognised.

[Pmalek]

I did also find this document from the OECD:

For example, in the case of loss or theft of a crypto-asset in Australia, the owner may claim a capital loss, provided they are able to present the evidence of their ownership.

So I am an Australian. I have Bitcoin in a wallet that I can prove belongs to me. For example, I purchased the coins on a centralized exchange where I performed KYC. I withdrew them from there to my wallet and that should be enough to prove they are mine. To avoid paying taxes, I "lose" my coins. I send them out over TOR to another Bitcoin wallet. From their, they get mixed, coin-joined, converted to Monero, gambled with, etc. Omg, I am so unlucky, someone stole my coins, but thankfully, I can claim capital losses.

I wonder what the Australian authorities would say to a claim like that. 

[DaveF]

I did also find this document from the OECD:

For example, in the case of loss or theft of a crypto-asset in Australia, the owner may claim a capital loss, provided they are able to present the evidence of their ownership.

So I am an Australian. I have Bitcoin in a wallet that I can prove belongs to me. For example, I purchased the coins on a centralized exchange where I performed KYC. I withdrew them from there to my wallet and that should be enough to prove they are mine. To avoid paying taxes, I "lose" my coins. I send them out over TOR to another Bitcoin wallet. From their, they get mixed, coin-joined, converted to Monero, gambled with, etc. Omg, I am so unlucky, someone stole my coins, but thankfully, I can claim capital losses.

I wonder what the Australian authorities would say to a claim like that. 

US here, but I am going to guess the same thing that happens here when anything is stolen that cannot be traced. The government accepts you at your word. And, if it ever comes out or can be proven that you lied you get arrested and charged with fraud.
It also is probably one of those things you can only do once. If it happens again, although they might let you claim it, they are going to look through all your finances very closely and see if they can find anything that is "not correct".

Kind of like a lot of stolen art fraud. Buy expense art, sell it under the table, claim theft, collect insurance.

-Dave

[n0nce]

In the US, loss of property (which is what bitcoin is classed as) can only be deducted from your taxes when it is caused by a federally declared disaster. So forgetting your wallet password or failure of your hard drive absolutely would not count.

Damn, paying wealth tax on something you don't own anymore, forever? This would be cruel

US here, but I am going to guess the same thing that happens here when anything is stolen that cannot be traced. The government accepts you at your word. And, if it ever comes out or can be proven that you lied you get arrested and charged with fraud.

This makes sense; so just make sure to not lose wallet files twice in a country with wealth tax, I guess?! I'm being honest; this is a thing that can and does happen to people.