Cryptocurrencies are fast becoming mainstream. And the reality is that it has produced a bag with mixed results. For one, people and organizations are now more knowledgeable about the possibilities of blockchain technology. More than ever, even businesses are taking a closer look at what blockchain tech could actually offer us. However, let’s admit that there are also a number of drawbacks.
Trump’s Latest Tax Code Law
The newest US tax code law isn’t just controversial for the tax cuts, but it is also meant for cryptocurrency investors. On December 22, US president Donald Trump signed into law the Tax Cuts and Jobs Act. This affects cryptocurrency traders and a lot of people are obviously taking a closer look.
So what exactly can you expect? First, the new law is historic because it offers a wide array of tax cuts. Over the last three decades, it is the first major overhaul that has been applied to the US tax code. Also, for the very first time, there is a law that addresses digital currencies.
Over the last years, the cryptocurrency space has been considered a Wild West. However, given the amount of money invested on cryptocurrencies this year, this law specifically targets cryptocurrency traders. In 2014, IRS stated that cryptocurrencies should be declared and treated as property for tax purposes, while any other tax issues relating to digital currencies have been largely unknown.
How Exactly Does the New Law Work?
Before the changes made by Trump on the tax law, there wasn’t any clear guideline how you can be taxed if you trade one digital currency for another. This means that prior to the newly enacted law, there are types of property that could be traded without subject to capital gains taxes.
In layman’s terms, a Bitcoin trader could switch to another cryptocurrency without being subject to capital gains simply because they were of a similar kind. Now, this is no longer the case. These trades are considered taxable.
If you think that this is the only change that will be applied to regulating cryptocurrencies, there are more changes to come.
There is also the proposed Cryptocurrency Tax Fairness Act. The bill mentioned that Bitcoin transactions that are less than $600 are not going to be subject to taxation. However, this bill failed to pass during a session.
IRS Already Taking a Closer Look
It has already been ruled that Coinbase turn over records of its users to the IRS. Coinbase had at least 5.9 million users that completed a combined $6 billion worth of transactions. In addition to this, it was discovered that only 800 to 900 taxpayers filed returns that relate to Bitcoin from 2013 to 2015.
Regulations Equal Protection?
Yes, there are new rules underway. However, it is important to note that added laws into play could mean protection for cryptocurrency investors, as well. This could mean that companies involved in cryptocurrency could be under strict scrutiny.
SEC announced that it stopped two ICOs this month alone after it was discovered that they defrauded investors of $15 million.