Silver Lining to Crypto Collapse - Tax Relief for US Hodlers

Colin Muller

“Rekt” cryptoasset holders smarting from the 2018 bear market might have cause for a little holiday cheer - if they are US citizens, at least. The Wall Street Journal (WSJ) has helpfully pointed out that tax laws on the books in the US provide some relief for loss-making investment property - which most cryptoassets count as.

The WSJ writer has based most of her statements on a 2014 US Internal Revenue Service (IRS) statement regarding digital assets, which can be found here.

Two Possibilities to Recoup Crypto Losses

The article outlines two basic scenarios which stand to benefit US persons who have lost on crypto investments this year. Losses on cryptoassets can be applied both to gains on other investments, and to deductions from income.

All losses can be applied against investment gains. So, according to the article, if someone has $10,000 worth of losses on a bitcoin investment but $10,000 worth of gains on some other investment, that person could apply the loss equally to the gains and pay no tax on it.

Alternatively, if one has no other investments other than loss-making cryptoasset investments, up to $3,000 worth of income tax deduction can be applied. This is to say, if a person has lost $2,999 on a bitcoin investment, $2,999 worth of income tax may then be deducted; but if the person has lost $3,001, only $3,000 worth of income tax may be deducted.

The WSJ mentions one more item of potential interest to US persons wishing to take advantage. Normally, investment assets cannot be sold and rebought sooner than 30 days apart, or else those assets will not constitute new purchases. This requirement does not apply to cryptoassets - so holders can, in effect, go on holding while still reaping the rewards of the tax relief, by selling and immediately rebuying their coins.

(We at CryptoGlobe certainly do our best, but this staff writer is not a lawyer. Please, absolutely none of this is financial advice. Consult a professional.)

Tax Crackdowns Around the World

Several governments around the world have lately launched special campaigns to tax and police cryptoasset gains. The IRS this past summer announced plans to cooperate with analogous tax and criminal agencies of the Netherlands, Australia, Canada, and the UK, in order to find tax evaders.

CryptoGlobe also recently reported on new rights of the Japenese National Tax Agency to request Know-Your-Customer information, and on the high number of “suspicious transactions” that had been noted by Japanese police.

Brazil’s Securities Watchdog Blocks Binance From Offering Derivatives

  • Brazil's SEC has blocked Binance from offering derivatives products in the country.
  • Brazilian regulators ruled that derivative contracts are securities, regardless of whether they involve crypto-assets. 

Brazil’s equivalent of the U.S. Securities and Exchange Commission, the Comissão de Valores Mobiliários (CVM), has blocked leading cryptocurrency exchange Binance from offering derivative products in the country. 

According to an order published July 6, reported on by local news outlet Portal do Bitcoin, Brazilian regulators claimed derivative contracts are securities, regardless of whether the underlying assets are cryptocurrencies. 

The order reads, 

It remains evident that there are indications that the company BINANCE FUTURES, through the page '"www.binance.com" on the world wide web, captures customers residing in Brazil with a public offering of derivative intermediation services.

The order continued, adding that Binance “does not hold authorization” to act as an intermediary for securities in the country. 

The CVM determined that Binance must immediately suspend the “broadcasting of any public offering of securities intermediation services,” including derivatives products or else face a daily fine of R $1,000 ($186). 

The order fails to clarify whether Binance’s spot trading services will continue to be allowed to operate in Brazil, as opposed to only banning their derivative offerings. 

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