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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

#131

Post by nprz »

tylersmith wrote: post #101
nprz wrote: post #53

Earlier quoted context omitted.

So they might as well just ask for their ransom via a wire transfer or paypal? Since their identity will be known anyway.

If ransomware used PayPal accounts or bank numbers those payments would quickly start being censored to cut off their payment rails. The value of crypto is all rooted in censorship resistance, not anonymity.

Wouldn't it have to be an agency in their own jurisdiction that would prevent the hacker from accessing banking services? They would make an effort to shut down the hackers bank account but not prosecute them?

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

#132

Post by awrence »

Tepix wrote: post #46
danielvf wrote: post #22

Finally found the text of the amendment: https://www.finance.senate.gov/imo/media/doc/Wyden%20Lummis%... The amendment is short and explicitly notes that that the following categories do not count as brokers: (A) validating distributed ledger transactions (B) selling hardware or software for which the sole function is to permit a person to control private keys which are used for accessing digital assets on a distribu…

I guess we need a proper CO2 tax to encourage better technology than proof of work

The math on the PoW energy FUD just doesn't check out.

- At current levels, bitcoin uses very roughly 0.1% of global electricity but electricity only represents 25% of fossil fuels emissions so current PoW contribution to global emissions = 0.025%, ie a rounding error. This issue is currently a total red herring. Now let's project into the future.

- bitcoin total addressable market cap if it took over the entire global monetary world (full global monetary premium): ~ 250tn or 300x from here implying a worst case outcome of 7.5% of global emissions, IF this happened TODAY and hashpower linearly tracked price. This is impossible off the bat because building out that infrastructure would take at least a decade. But more importantly it will take a decade or two for price to get there, by which time...

- The block subsidy will have gotten cut by ~ 10 (three halving cycles). Transaction fees might grow of course so let's say 5x lower which gets us back to 1.5% of global emissions.

- Add to that the following:

- 30% of CURRENT electricity production is stranded / wasted. All terminal bitcoin energy usage needs to do is tap into 5% of that to be emissions neutral. And it's heavily skewed towards tapping into that exclusively as that's the cheapest source and PoW is location neutral.

- the proof of work energy mix skews towards not only wasted / stranded but renewable which is trending towards being the cheapest form of energy.

- green power production is on an exponential adoption curve and enough sunlight hits the earth to power humanity for a year. Clean energy is there in amounts dwarfing societal needs, it's just a matter of harnessing it. This doesn't even include geothermal or nuclear.

- At an even higher level, if you got to this point, you would have replaced all the fiat systems in the world thereby: - eliminating the energy spent on maintaining the fiat system which is easily more than 1.5% of global emissions - flipping the world into a hard money world that is no longer incentivized to consume at all costs (read misallocate capital) ergo hugely reducing conspicuous consumption / GDP growth at all costs which is arguably the biggest driver of unnecessary emissions

- This final line of thought would have you conclude flipping to PoW would be emissions negative in the long run, but you don't really need to go there though, the energy numbers alone make this at best a chronically misunderstood narrative.

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

#133

Post by Taek »

Tepix wrote: post #46
danielvf wrote: post #22

Finally found the text of the amendment: https://www.finance.senate.gov/imo/media/doc/Wyden%20Lummis%... The amendment is short and explicitly notes that that the following categories do not count as brokers: (A) validating distributed ledger transactions (B) selling hardware or software for which the sole function is to permit a person to control private keys which are used for accessing digital assets on a distribu…

I guess we need a proper CO2 tax to encourage better technology than proof of work

A proper CO2 tax wouldn't be disruptive to bitcoin, bitcoin only cares that everyone pays the same price for electricity. If the absolute cost of electricity goes up, nothing changes.

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

#134

Post by deegles »

meowkit wrote: post #84
animal_spirits wrote: post #76

> That means that the IRS will not be able to require that miners, stakers and companies that sell hardware or software for storing digital assets report the activities of their customers or crypto users whose transactions they verify. > In a statement, Wyden said that “investors failing to pay tax they owe through cryptocurrency is a real problem,” but that the law as previously written was too broad and would have…

You’re off base. The original definition was putting tax and KYC requirements on people who don’t have, and can’t get, that information. Network nodes facilitate transactions, they don’t broker them. Its like treating an exchanges electricity provider as part of the equity trade. It’s not tax evasion. The law as originally stated would have crippled the industry in the US.

Devil's advocate for a moment... the definition of a broker is "a person who buys and sells goods or assets for others," or it can mean to "arrange or negotiate" a deal or plan.

How is a miner not a broker then? They accept transactions and then place them on a blockchain by performing some kind of work. Sure, at the moment few if any cryptos are definitely securities, but what is going to happen when a company creates (for example) a wrapped SP500 token? A "traditional" broker can't just trust anyone to record a transaction, there is a lot of regulation.

Will there be a class of tokens that can only be mined by people who can do KYC on them? Why is a miner exempt from caring about what transactions they accept?

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

#135

Post by freeone3000 »

X6S1x6Okd1st wrote: post #127
kelnos wrote: post #111

Earlier quoted context omitted.

In this case, I think you could work around that, as they could implement a high capital gains tax rate for cryptocurrency sales. Then it would only impact people who mine. Obviously it seems they are going in the exact opposite direction on this, though...

Miners typically get their funds as income, not necessarily cap gains.

It's a gain based on your invested capital, isn't it? It's textbook capital gains. PoS, PoW, whatever.

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

#136

Post by nprz »

tablespoon wrote: post #129
nprz wrote: post #25

Earlier quoted context omitted.

So why are ransomware hackers never prosecuted?

> So why are ransomware hackers never prosecuted? Because they're typically based in Russia, and Russia has a policy that it will not prosecute its citizens for computer crimes unless they perpetrated them against Russians or Russian organizations. My understanding is most ransomware has code to detect Russian computers (e.g. by checking localization settings), and will refuse to run if it finds itself on one for tha…

So why not just send the payment to a Russian bank?

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

#137

Post by arcticbull »

Taek wrote: post #133
Tepix wrote: post #46

Earlier quoted context omitted.

I guess we need a proper CO2 tax to encourage better technology than proof of work

A proper CO2 tax wouldn't be disruptive to bitcoin, bitcoin only cares that everyone pays the same price for electricity. If the absolute cost of electricity goes up, nothing changes.

Unless the tax applies globally then they’ll just flee to Kazakhstan. Oh wait; they won’t have to flee far.

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

#138

Post by thesausageking »

irishloop wrote: post #68
thesausageking wrote: post #57

Earlier quoted context omitted.

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?

The IRS has teams of crypto experts and they use tools like Chainalysis that do much of the low level analysis for them. Also, they get data from crypto exchanges so when someone sells Bitcoin for dollars to cash out, Coinbase will (in most cases) send the IRS the 1099.

Like the rest of the US tax system, it's based on the tax payer being required to submit what she owes. If she lies about her income, the enforcement comes from the risk of IRS doing an audit and asking you to show where you got your funds from. It's no different than if you own a restaurant or other private business. You can misreport your earnings, but the risk is the IRS will audit you and you will get fined or possibly go to jail.

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

#139

Post by cwkoss »

danielvf wrote: post #22

Finally found the text of the amendment: https://www.finance.senate.gov/imo/media/doc/Wyden%20Lummis%... The amendment is short and explicitly notes that that the following categories do not count as brokers: (A) validating distributed ledger transactions (B) selling hardware or software for which the sole function is to permit a person to control private keys which are used for accessing digital assets on a distribu…

Also note that this crypto tax-reporting provision was slid into a huge bipartisan infrastructure deal. It really never should have been included in this legislation in the first place.

Exempting actors in the crypto space who facillitate crypto usage without ever having custodial control of the funds makes a lot of sense. (Just like envelope manufacturers shouldn't have to register as money transmitters because people sometimes mail cash.) The provision that was slid in was nonsensically bad.

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

#140

Post by tablespoon »

nprz wrote: post #136
tablespoon wrote: post #129

Earlier quoted context omitted.

> So why are ransomware hackers never prosecuted? Because they're typically based in Russia, and Russia has a policy that it will not prosecute its citizens for computer crimes unless they perpetrated them against Russians or Russian organizations. My understanding is most ransomware has code to detect Russian computers (e.g. by checking localization settings), and will refuse to run if it finds itself on one for tha…

So why not just send the payment to a Russian bank?

> So why not just send the payment to a Russian bank?

I don't know, I'm not a Russian in the ransomware business.

But I speculate that doing it that way might be so blatant and inconvenient to the Russian government that it might get the policy that protects them changed. Also, I'd imagine any bank that accepts such payments would quickly get itself blacklisted. This stuff isn't actually binary, so it's not smart to take it to the limit.

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