Coinbase Custody Becomes a Qualified Custodian for XRP, BTC, LTC, BCH, ETH, and ETC

On Tuesday (23 October 2018), crypto exchange Coinbase announced on its Medium blog that "Coinbase Custody had obtained a license under New York State Banking Law to operate as an independent Qualified Custodian," and that "Coinbase Custody will operate as a Limited Purpose Trust Company chartered by the New York Department of Financial Services (NYDFS)."

Coinbase Custody provides "an institutional-grade service optimized for storing large amounts of cryptocurrency in a highly secure way." It has the following features:

  • Segregated Cold Storage: "Separate and dedicated accounts for all your assets."
  • Financial & Security Controls: "... regular financial and security audits by external firms."
  • Dedicated Coverage: "Client service from Coinbase’s Institutional Coverage team in New York and ETC in LA."
  • SLAs on Fund Transfers: "Guaranteed response times to move assets."
  • Insurance: "Digital assets stored with Coinbase Custody are covered by our insurance policy."
  • Multi-User Accounts (Coming Soon): "Custom user and organizational controls across all your accounts."
  • Support for five digital asset types: Bitcoin, Bitcoin Cash, Ether, Ether Classic, and Litecoin. (Support for ERC-20 tokens coming soon.)

Coinbase says that "Coinbase Custody Trust Company will "operate as a standalone, independently-capitalized business to Coinbase Inc. and will be held to the same compliance, security and capital requirements as traditional fiduciary custodial businesses like the DTC."  This means that the company "has met the rigorous banking standards of NYDFS regarding capitalization, anti-money laundering procedures, confidentiality, security and storage. The trust charter also designates Coinbase Custody as a fiduciary under New York State Banking Law."

As for the NYDFS, it issued a press release today, which said that

  • The NYDFS had "approved the application of Coinbase Custody Trust Company LLC, a wholly-owned subsidiary of Coinbase Global, Inc., to operate as a limited purpose trust company."
  • "Coinbase Inc. has held Money Transmitter and Virtual Currency licenses from DFS since January 2017."
  • The NYDFS had approved "Coinbase [Custody] Trust to offer secure custody services for six of the largest virtual currencies: Bitcoin, Bitcoin Cash, Ethereum, Ether Classic, XRP and Litecoin."

Financial Services Superintendent Maria T. Vullo stated:

“New York continues to be a leader in creating, fostering, and responsibly regulating a financial services marketplace that promotes innovation, safeguards the industry and protects consumers through strong supervision. Today’s approval further demonstrates that the state regulatory system is the best arena in which to responsibly supervise the growing fintech industry within a sound and compliant framework.”

And Asiff Hirji, President and Chief Operating Officer of Coinbase, added:

“Since 2014, the New York Department of Financial Services has proven itself to be a strong advocate in its support for the responsible growth of the cryptocurrency industry. The New York State Limited Purpose Trust charter, which now enables Coinbase Custody to act as a Qualified Custodian for crypto assets, builds on our unparalleled success as a crypto custodian while holding the company to the same exacting fiduciary standards and oversight of other, mature financial institutions operating in New York. We applaud the leadership Superintendent Vullo has shown to guide the responsible growth of the cryptocurrency ecosystem and look forward to working with their offices in the future."

The Coinbase COO also sent out this tweet:

Anthony Pompliano, Founder & Partner at Morgan Creek Digital, had this to say:

There are three interesting things to note about this announcement:

  • Coinbase Custody, which had until now been a division of Coinbase, Inc., is now a new legal entity that is separate and "independently-capitalized" from Coinbase, Inc., which means a greater level of protection for the clients of Coinbase Custody.
  • Coinbase has now become the only U.S.-based crypto exchange that offers its own qualified custody service for cryptoassets. (But note that crypto custody solution providers Kingdom Trust and BitGo are also qualified custodians for digital assets, having received their trust charters from South Dakota Division of Banking.) 
  • The New York State Department of Financial Services approved Coinbase Custody Trust to offer custody for XRP, even though Coinbase Custody currently does not offer support for XRP, which means that it is highly likely that Coinbase Custody is planning to offer support for XRP in the near/medium future (otherwise, why would Coinbase Custody Trust ask the NYDFS to give its blessing for custody of XRP tokens?). 

 

Featured Image Courtesy of Coinbase

How to File Your Cryptocurrency Taxes

2018 saw an incredible influx into the crypto space following the bull run of late 2017. If you bought, traded or mined cryptocurrencies during 2018, there is an important deadline approaching.

The filing deadline to submit tax returns for 2018 is April 15. Unfortunately, the process for filing taxes for cryptoassets is far from straightforward. Fortunately we’ve compiled some useful tips and software that makes the process less daunting.

The Problem

The IRS considers cryptocurrencies to be property for tax purposes, not currencies, meaning that they treat them as they would any other asset - e.g. stocks or gold. This means legally that ‘realized’ trades are classified as capital gains or capital losses.

You are only taxed on ‘realized’ gains - meaning cashing out your crypto for fiat, receiving crypto from mining, forks or airdrops, getting crypto as a salary, and paying for goods with crypto. Where it gets really complicated however, is that the IRS also considers trades between cryptoassets to be taxable events. This can prove a real headache when it comes to filing taxes.

What You Need to File Crypto Taxes

Before getting on to how this can be done more effectively, here’s a list of the information you will need to get hold of so you can file your taxes correctly.

  1. A list of all exchanges you’ve used to buy, sell or trade cryptoassets

This is perhaps the most important data for most users. For most users this will be where you converted your first fiat into crypto, and where you traded between cryptoassets in 2018. Importantly, you need complete data from all years you have bought or sold cryptocurrency, not just the tax year (2018) you are doing returns for.

       2.  A record of cryptoassets received from forks and airdrops

These tokens received will appear in your exchange data, but it is important to have a record of what the coins are and when you received them as they will appear ‘out of nowhere’ in your account.

       3. A record of cryptoassets received from mining

It’s important to keep track of any crypto you have received from mining and the date and time at which you received the payouts, as the IRS also deems this to be taxable gains.

       4. A record of cryptoassets received as income

Any cryptoassets you received as a salary, for jobs or other income - with the time and date of receipt.

       5. A record of any crypto received as a gift

Although treated differently for tax purposes, it’s important you keep a record of any cryptoassets you received as a gift.

Filing Your Taxes

For most crypto users and investors manually collecting all the required data is a long and arduous challenge, and users still will then have to prepare all the correct forms themselves.

If you’re doing it yourself and you have no formal evidence of how you arrived at the amount for your capital gains, the IRS may apply a “zero-cost basis” - meaning that they can tax you on your entire crypto holdings (as well as charging you with any penalties for incorrect filing).

The Solution

Fortunately, there is now software that makes the entire process far easier and manageable.

BitTaxer is a CPA-Approved tool that is designed to streamline the entire procedure. Designed for both individual use and for CPAs, the tool makes it very simple for users to comply with IRS guidelines and avoid the complexities of calculating the tax on their own.

All users need to do is add transaction data from their own records, or import them from their cryptocurrency exchanges and wallets and classify which transactions aren’t buys and sells. The tool guides you through the entire process.

BitTaxer then takes care of everything, calculates your correct gains and losses and provides you with all the forms necessary to be attached to your tax returns or exported to your tax software.

With the deadline fast approaching on April 15, investors and CPAs alike will benefit from the software, without having to gain the expertise needed to accurately file their crypto taxes personally.

 

This post is for informational purposes only and should not be taken as tax or investment advice. Please speak to your own tax expert, CPA or tax attorney with regard to filing your own taxes.