What is Cryptocurrency?
Cryptocurrency is a form of digital currency that’s been taking the world by storm. The rise of cryptocurrency has been astonishing.
The coins are mined by using large amounts of specialized computer processing power to de-encrypt and verify electronic transactions, until they are added to a public blockchain. One of the most popular forms of cryptocurrency is bitcoin, which is most commonly used for financial transactions. Unlike traditional forms of currency, crypto isn’t regulated or issued by a government, and because of this, no central bank, government, miners, coders or users can fully control the currency supply, as we previously mentioned in our article on ‘Why Invest in Bitcoin’. As such, anyone can buy, send, and receive it at any time of the day without limits, restrictions, and boundaries — all under anonymous and extremely secure methods.
Cryptocurrency Crimes and the Government
As you may have already guessed, it can be difficult for legal entities to regulate bitcoin, leading to the rise in cybercrimes. For instance, global access to the internet enables money launderers to mask their illicit profits alongside their legitimate ones, while digitally moving these payments across country borders.
According to an article by Forbes, cryptocurrency has become a very popular means for criminals to launder their money, with a reported £4 billion ($5.2 billion) being laundered in 2018 through cryptocurrencies in Europe alone. Because of this, “there has been a call from governments around the globe to introduce anti-money laundering regulations for cryptocurrencies.” As a result, the EU has taken recent measures to ensure that cryptocurrency exchanges must also comply with their anti-money laundering regulations, just like any other fiat currency or transaction.
What makes a global consensus on the regulation of cryptocurrency so difficult is that countries all across the world have varying takes on the matter. Currently, Visual Capitalist states that only a few major countries such as Australia, Switzerland, and Mexico accept it as a form of legal tender, although some retailers in the USA and Canada do accept it as a form of payment.
Defense Attorneys for Cryptocurrency Charges
Even though cryptocurrency is a relatively new field of technology, federal charges against people who commit cybercrimes with or without knowledge in these areas are still serious matters. The American government, in fact, has close to unlimited resources to investigate and prosecute these high-cost crimes, which is why knowing your rights and having a knowledgeable attorney are as important — if not more important — as understanding bitcoin. One of the key traits outlined by Special Counsel’s post on defense lawyers, is the ability to stay updated with changes and new developments in the legal field, which is a digital-heavy landscape involving the burgeoning areas such as bitcoin and other cryptocurrencies.
A recent development that you should be aware of is the updated tax guidance notice in the US regarding cryptocurrency, just recently published by the IRA. According to an article by Coin Desk, it outlines key information including the correct methods for valuing cryptocurrency as received as income and how to calculate taxable gains when selling cryptocurrencies. They state that the cost should be calculated by adding up the total cost to acquire the crypto, “including fees, commissions and other acquisition costs in US dollars.”
Furthermore, if the crypto is purchased on a peer-to-peer exchange or a DEX it is possible to use a cryptocurrency price index to determine the fair market value. The IRS further clarifies that this could be “a cryptocurrency or blockchain explorer that analyzes worldwide indices of a cryptocurrency and calculates the value of the cryptocurrency at an exact date and time.” Similarly, during the selling process, taxpayers can identify the coins they are disposing of, “either by documenting the specific unit’s unique digital identifier such as a private key, public key, and address or by records showing the transaction information for all units.”
As a result, accurately reporting your income and any cryptocurrency you buy and sell in the US is crucial if you wish to operate within the law and avoid any criminal charges. Because the world of cryptocurrency is constantly evolving, legislation is also developing and changing alongside it. That’s why it’s crucial to keep yourself updated on the latest news if you’re heavily invested in cryptocurrency.