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Senators move to exempt Bitcoin, crypto miners from proposed U.S. tax rules

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Re: Senators move to exempt Bitcoin, crypto miners from proposed U.S. tax rules

#61

Earlier quoted context omitted.

> the point I was trying to make is that Bitcoin is beyond the tipping point It’s no longer about Bitcoin. It’s about alternative asset classes. I think the new ventures in the crypto space have realized that BTC is old news and that the real money is in creating endless new crypto assets and ventures.

I guess that is the worry of any government: money that could fuel the economy gets spirited away into dubious Crypto ventures - e.g. Dogecoin. BTC might be old news but it isn't a deliberate scam.

Wasn't Dogecoin originally intended as a joke, not a scam?

Re: Senators move to exempt Bitcoin, crypto miners from proposed U.S. tax rules

#62
post #3

Sidetopic, but I am rather disappointed that Venmo has been pressuring me via email to embrace crypto and imagine behind the scenes they own however much, trades only get executed internally, and they do their best to extract transaction fees. To me this is the antithesis of what the crypto community was looking to stand for in terms of privacy and independence from traditional banking systems.

Venmo is clearly offering a service with the conveniences and ease of use that come with it. If you do not see the value and fees of that service, you can skip it and set up your own wallet, BTC node, etc.

Re: Senators move to exempt Bitcoin, crypto miners from proposed U.S. tax rules

#63

Earlier quoted context omitted.

Venmo is pushing crypto hard because Instant Payments are coming down the pipeline from the Fed in the next 18 months (already in beta testing with a handful of smaller banks, they're ahead of schedule based on my reading of the roadmap), and that kills Venmo (and Paypal to a lesser extend) if they don't have something to pivot to. That's what you're seeing Visa, Paypal, and others attempt to go upmarket (business pa…

Venmo's core value right now is that it's ubiquitous. Everyone has a Venmo account and everyone trusts it. I paid an electrician through it yesterday -- no new Fed tech is going to replace it overnight, just like Zelle didn't kill it either.

https://www.forbes.com/sites/ronshevlin/2019/02/11/venmo-ver... (According to company reports, Zelle processed $35 billion in P2P (person-to-person) payments in Q4 2018 versus $19 billion for Venmo. For the full year, Zelle's total was $122 billion, almost double Venmo's $62 billion.) (2019)

https://www.zellepay.com/press-releases/zeller-closes-2020-r... (Zelle® Closes 2020 with Record $307 Billion Sent on 1.2 Billion Transactions, Nearly 7,000 financial institutions are represented in the Zelle Network via their customers using the Zelle common mobile app, Achieving ubiquity with banks and credit unions: Nearly 500 new financial institutions of all sizes joined the Zelle Network® in 2020)

https://www.businessofapps.com/data/venmo-statistics/ (Venmo key statistics. Venmo processed $159 billion in total payment volume in 2020)

If anyone can plug into instant payments, your value as an instant payment provider that just does payments will fall rapidly.

Re: Senators move to exempt Bitcoin, crypto miners from proposed U.S. tax rules

#65

Earlier quoted context omitted.

I'm pretty sure mixers are currently illegal and will be treated as such once the debate starts. Money laundering (aka, pooling cash together to make it harder to track) is defacto illegal by itself, even if you use the money for legitimate purposes.

What you described is not illegal by itself. Obfuscating the origin of earnings is not illegal. Although "pooling" may be regulated in other ways. A federal "money laundering" charge requires an illicit origin, and so since successful money laundering will never have an illicit origin, the charge can only be tacked on to another indictment. After centuries of not having much surveillance tools of the money supply, th…

> A federal "money laundering" charge requires an illicit origin, and so since successful money laundering will never have an illicit origin, the charge can only be tacked on to another indictment.

Fair.

But think about it: a _singular_ person in your mixing pool can make the entire pool illegal. One, singular, person using that money for contraband (illegal porn, illegal drugs, illegal tax evasion) will turn the entire pool illegal.

Do you trust everyone else in the pool to be using it for legitimate gains? If you went into court, would you be able to say with a straight face that "Everyone in my mixing pool was in fact, doing legal activities?"

So in practice, I'd argue that most mixers are illegal (because surely, there's at least one person using the mixer for illegitimate purposes). Furthermore: the BTC transaction into the pool (and out of the pool) will forever be written into the blockchain. If you use your same wallet for both sides (or if the prosecutors can prove that one of your wallets was on the input-side, and another one of your wallets was on the output-side of the mixing process), you're now tied to all of the illegal activities that mixing pool is associated with.

----------

That's the thing. Mixing pools have never been tested in court. But imagine what a prosecutor would say to a jury, and imagine what the jury would rule.

Re: Senators move to exempt Bitcoin, crypto miners from proposed U.S. tax rules

#66
post #3

Sidetopic, but I am rather disappointed that Venmo has been pressuring me via email to embrace crypto and imagine behind the scenes they own however much, trades only get executed internally, and they do their best to extract transaction fees. To me this is the antithesis of what the crypto community was looking to stand for in terms of privacy and independence from traditional banking systems.

Venmo is pushing crypto hard because Instant Payments are coming down the pipeline from the Fed in the next 18 months (already in beta testing with a handful of smaller banks, they're ahead of schedule based on my reading of the roadmap), and that kills Venmo (and Paypal to a lesser extend) if they don't have something to pivot to. That's what you're seeing Visa, Paypal, and others attempt to go upmarket (business pa…

Sucks for Venmo, cash, etc. But clearly those apps can simply uptake instant payments (affiliate with bank or gain bank status) and stay relevant?

Re: Senators move to exempt Bitcoin, crypto miners from proposed U.S. tax rules

#67
post #4

It seems rather unprecedented that there are currently US citizens who are billionaires because of their crypto holdings, without the government having any insight into precisely who these people are. It seems like eventually the government is going to push for more onerous reporting laws to return to the usual equilibrium, where the government has at least some basic idea regarding who owns what (which I think they…

It's very unlikely there are US citizens in the US who are Bitcoin billionaires and have not reported it and paid taxes to the government. Unless you're planning to flee the country, at some point the IRS will catch up with you. Remember that Bitcoin is an open, public ledger of every transaction. If someone is a billionaire, paying capital gains taxes is worth their freedom without a doubt.

There is currently absolutely no requirement in the US to report crypto holdings, only crypto sales.

So it is very likely there are such people, especially since it is common to divide large holdings between many separate addresses, making it impossible to infer holdings from sales income.

Re: Senators move to exempt Bitcoin, crypto miners from proposed U.S. tax rules

#68
post #4

It seems rather unprecedented that there are currently US citizens who are billionaires because of their crypto holdings, without the government having any insight into precisely who these people are. It seems like eventually the government is going to push for more onerous reporting laws to return to the usual equilibrium, where the government has at least some basic idea regarding who owns what (which I think they…

It's very unlikely there are US citizens in the US who are Bitcoin billionaires and have not reported it and paid taxes to the government. Unless you're planning to flee the country, at some point the IRS will catch up with you. Remember that Bitcoin is an open, public ledger of every transaction. If someone is a billionaire, paying capital gains taxes is worth their freedom without a doubt.

But the IRS needs a mechanism to understand and interpret these ledgers, right? And the IRS enforcement is only as good as the people who are doing the enforcing.

I'm an engineer and I barely understand crypto, what hope does an IRS auditor have?

Re: Senators move to exempt Bitcoin, crypto miners from proposed U.S. tax rules

#69
post #40
post #25

Earlier quoted context omitted.

So why are ransomware hackers never prosecuted?

Usually it involves conversion of illegally gained assets into untraceable cryptocurrencies such as XMR (Monero) and then subsequent funneling and conversion of those assets back into USD via offshore exchanges. IRS is offering $625,000 USD to anyone that can crack the Monero algorithm [1]. [1] https://www.forbes.com/sites/kellyphillipserb/2020/09/14/irs...

> conversion of those assets back into USD via offshore exchanges.

They would probably not exchange into USD, there are plenty of other currencies and they would probably favor a local currency.

Re: Senators move to exempt Bitcoin, crypto miners from proposed U.S. tax rules

#70
post #51

Earlier quoted context omitted.

Thanks for sharing, I as well didn't know about this. I've enrolled/used Zelle (via my bank app) and it's just a travesty of usability to me, after awhile I ditched it (and I don't hear a lot in the news about Zelle these days). What's your hot take on this new FedNow system vs. what Zelle tries to achieve via ACH? Do you think it'll be more "Venmo-like" (low friction) or will it end up a usability mess due to regula…

Zelle is owned by a consortium of the largest US banks [1], and does much more volume than Venmo (because its built into the UX of those participating in Zelle's real time payment network [2]). Congress strongly encouraged the Fed to develop FedNow to prevent Zelle from keeping smaller banks out of instant payment infra. FedNow will eventually replace the ACH system. Hot take: banks being banks, they'll crowd out fin…

> FedNow will eventually replace the ACH system

Now that's interesting - does that imply that the clearing delays in transfer (say your US Bank to your Brokerage, ~3 days ACH) will disappear and FedNow makes that an "instant" (within 1 day let's say) settled transfer? Very intriguing.

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