Cryptocurrencies Are Taxable and Not Free From Fraud

In this report, the authors discuss cryptocurrencies — especially bitcoin — and argue that because the IRS lists them as property, they are taxable, and because they are not as anonymous as once thought, they are not free from fraud. Cryptocurrencies are digital assets used as a medium of exchange, but they are not really coins. They can be sent electronically from one entity to another almost anywhere in the world with an internet connection. There are many cryptocurrencies in the market, including bitcoin, ethereum, ethereum classic, litecoin, nem, dash, iota, bitshares, monero, neo, and ripple. Many of the cryptocurrency networks are not controlled by a single entity or company; instead, a decentralized network of computers keeps track of the currency using a token ID. A ledger maintains a continuously growing list of date stamped transactions in real time called “blocks.” This technology is known as blockchain, which records, verifies, and stores transactions without a trusted central authority. The network instead relies on decentralized autonomous organizations (DAOs) with uncertain legal standing

Blockchain Technology - China\u27s Bid to High Long-Run Growth

Despite having the second largest economy at $13 trillion, China has only recently surpassed the World Bank’s definition of the ‘middle-income range’ which is a gross national income per capita between$1,000 to $12,000 (constant 2011 international$). This is a noteworthy accomplishment since many other developing nations have fallen victim to economic stagnation within this range leading to the term “middle-income trap”. This paper will argue that one of the ways in which China escaped the middle-income trap and will continue to grow its economic influence is through the support of blockchain technology. Research and development, early technological adoption and business climate all play a role in explaining how the Chinese public and private sector have used blockchain technology to encourage economic growth. While there are many questions and misconceptions about blockchain technology and its place in China, this paper seeks only to answer a select few

Free Money, But Not Tax-Free: A Proposal for the Tax Treatment of Cryptocurrency Hard Forks

Cryptocurrency has attracted extraordinary attention as one of the greatest financial innovations in recent years. Equally noticeable are the increasingly frequent cryptocurrency events, such as hard forks. Put simply, a cryptocurrency hard fork happens when a single cryptocurrency splits in two, which results in original coin owners receiving free forked coins. Such hard forks have resulted in billions of dollars distributed to U.S. taxpayers. Despite ongoing regulatory efforts, to date, the Internal Revenue Service (IRS) has yet to take a clear position on the tax treatment of cryptocurrency hard forks. The lack of useful guidance when filing tax returns has left taxpayers genuinely confused in the past few years. To fill this regulatory gap, this Note proposes a framework for cryptocurrency hard fork taxation. It explains the underlying technology of cryptocurrency hard forks, examines the recommended guidelines from the American Bar Association and the Association of International Certified Professional Accountants on cryptocurrency hard fork taxation, and references the current practices in Japan and the United Kingdom to lay a solid foundation for the proposed framework. Ultimately, this Note proposes a two-pronged tax on cryptocurrency hard forks. The first tax is levied on the profit made from the receipt of forked coins, and the second tax is levied on the profit made from the disposition of forked coins. A concrete proposal is provided for the applicable coin valuation, tax basis, holding period, and tax rate for the two prongs. Aiming to propose a tax treatment that is closest to the nature of cryptocurrency hard forks, this proposal considers various practical concerns, such as the inefficiency of the cryptocurrency market, the indirect possession of forked coins through third-party exchanges, and the fluctuating trading prices of forked coins when determining the valuation, tax basis, and holding period. This proposal not only provides clarity for taxpayers in filing tax returns and fulfilling tax obligations, but it also relieves the potential tax deferral and tax evasion problems that arise after a cryptocurrency hard fork

Hashing It Out: Problems and Solutions Concerning Cryptocurrency Used as Article 9 Collateral

The article analyzes the potential uses of cryptocurrency as collateral in Article 9 secured transactions. At present, there is no clear guidance as to what status, if any, cryptocurrency has as collateral under Article 9. This paper briefly defines cryptocurrency, explains how it functions in its various forms, and shows why it would behoove lenders to utilize cryptocurrency as collateral. The current regulatory efforts over cryptocurrency are discussed to provide some context, through which the proposed actions and revisions of Article 9 are viewed. Finally, this paper recommends how cryptocurrency can be used as collateral under Article 9 under the current system, suggests possible revisions or explanatory notes which can be added to Article 9 to provide clearer guidance for policymakers and lenders alike

Hashing It Out: Problems and Solutions Concerning Cryptocurrency Used as Article 9 Collateral

The article analyzes the potential uses of cryptocurrency as collateral in Article 9 secured transactions. At present, there is no clear guidance as to what status, if any, cryptocurrency has as collateral under Article 9. This paper briefly defines cryptocurrency, explains how it functions in its various forms, and shows why it would behoove lenders to utilize cryptocurrency as collateral. The current regulatory efforts over cryptocurrency are discussed to provide some context, through which the proposed actions and revisions of Article 9 are viewed. Finally, this paper recommends how cryptocurrency can be used as collateral under Article 9 under the current system, suggests possible revisions or explanatory notes which can be added to Article 9 to provide clearer guidance for policymakers and lenders alike

Cryptocurrency\u27s Unique Emergence: An Industry Analysis on the Factors Behind a Meteoric Rise and Uncertain Future

The world of cryptocurrency is a fascinating assortment of paradoxes. A world of digital currencies largely built for electronic transactions but with seemingly few vendors to transact with. A world that everyone seems to be talking about but no one can seem to easily define. A world where titans of financial industry publicly lambast the product while having their companies prepare to monetize it in the next room. A world whose digital attributes cause it to be decried as “fake” or “not real” currency while only 24% of Americans still use actual cash for most of their purchases. A world that was literally named for its security but has become infamous for some of its hacks. It is a world where an interesting creation story and atypical market factors have blended to make something wholly unique. This point is very important. To truly understand why cryptocurrencies have performed the way they have and gain insight into how they might look in the future, you have to approach the situation knowing that it is different from any other

Contracts Ex Machina

Smart contracts are self-executing digital transactions using decentralized cryptographic mechanisms for enforcement. They were theorized more than twenty years ago, but the recent development of Bitcoin and blockchain technologies has rekindled excitement about their potential among technologists and industry. Startup companies and major enterprises alike are now developing smart contract solutions for an array of markets, purporting to offer a digital bypass around traditional contract law. For legal scholars, smart contracts pose a significant question: Do smart contracts offer a superior solution to the problems that contract law addresses? In this article, we aim to understand both the potential and the limitations of smart contracts. We conclude that smart contracts offer novel possibilities, may significantly alter the commercial world, and will demand new legal responses. But smart contracts will not displace contract law. Understanding why not brings into focus the essential role of contract law as a remedial institution. In this way, smart contracts actually illuminate the role of contract law more than they obviate it

An examination of blockchain technology and Venezuela’s sovereign-based cryptocurrency including the effects of implementing a sovereign-based cryptocurrency in developing countries.

Masters Degree. University of KwaZulu-Natal, Durban.After the 2008 financial crisis and the failure of the banking system there was a need to develop alternate payment systems where there was no intermediary involved. In 2008, Bitcoin was developed by Satoshi Nakamoto, and it did not require an intermediary. The invention of Bitcoin and cryptocurrencies in general, has numerous advantages that can be beneficial to society. Venezuela, a developing country, created their own sovereign cryptocurrency as an attempt to ease the economic strain that burdens the country. The main focus of this research is to examine cryptocurrencies and blockchain technology by looking at Venezuela’s Petro as the model to assess whether such a development would be beneficial to a developing country such as South Africa. In addition, any risks that are attached to this invention will be examined. his research was based on the qualitative approach. Various journal articles, online articles and legislation was consulted to assist with the research of this paper. This research was aimed at assisting the relevant stakeholders of developing countries such as South Africa since such countries are facing economic crises. The Petro which was introduced by Venezuela has been critiqued to have numerous flaws due to the lack of research and investigation by the Venezuelan government. Furthermore, such a development defeats the purpose of a cryptocurrency. The South African Reserve Bank experimented with distributed ledger technology which is based on the blockchain, where interbank transactions were simulated. Although the experiment was successful, the South African Reserve Bank stated that such a system would not be implemented currently as more research needs to be conducted. Considering the various implications, it was concluded that introducing a sovereign cryptocurrency would not be viable and feasible in a country like South Africa. This research paper recommends that the developing countries consider implementing blockchain technology in various institutions as this technology has many uses and advantages such as assisting with the voting process, as well as minting citizen’s information. A further recommendation is for the South African Reserve Bank to research the area of blockchain technology in the banking system as this would decrease interbank transactional costs thereby allowing more transactions to be completed in a shorter amount of time