Category Archives: Cryptocurrency

Illinois Cryptocurrency: Pay Your Taxes With Bitcoin?

Illinois CryptocurrencyCryptocurrencies have become legitimate market movers; so some states, like Illinois, are considering token tax payments.

Illinois Cryptocurrency: Accepting Bitcoin Could Help Cure Budget Problem

Michael Zalewski, a state representative in the Land of Lincoln, introduced a bill that would allow for cryptocurrency tax payments. His rationale is that by accepting bitcoin, and other pre-approved altcoins, Illinois would collect more taxes, which would bolster the state’s bottom line.

Under the proposed system, taxpayers would send crypto to the state, which authorities would convert to dollars within 24 hours of receipt.

Illinois Cryptocurrency: Other States Are Making Similar Moves

You won’t be able to pay this year’s taxes with bitcoin. The bill needs to pass both houses of the Illinois legislature and then signed into law by the governor.

Still, cryptocurrency advocates welcome the news. Hey, if government entities continue to entertain the issue,  cryptocurrencies will likely gain wider acceptance.

Lawmakers have introduced similar pieces of legislation in New Hampshire, Arizona, and Georgia. But, so far, none have become law.

Being able to pay taxes with cryptocurrency would be hugely beneficial for token investors. Using the current exchange rate, the average taxpayer in Illinois would easily be able to take care of his or her tax bill by parting with just a single bitcoin.

Connect With An Illinois Cryptocurrency Lawyer

The Gordon Law Group regularly works with cryptocurrency investors and blockchain businesses on everything from contract negotiations to compliance consultations. Additionally, our attorneys are well-versed in various offshore token investment opportunities and asset protecting options.

We’ve built a reputation in the crypto community as straight shooters with inventive solutions. Get in touch today to begin the conversation.

CLOUD Act: International Data Sharing Bill Quietly Passes; Crypto Community Not Impressed

CLOUD Act lawyerIn addition to the $1.3 trillion spending bill, lawmakers unanimously gaveled the Clarifying Overseas Use of Data (“CLOUD Act”) into federal law books. Its ratification may impact cryptocurrency investors.

What Does The CLOUD Act Do?

Essentially, the CLOUD Act allows law enforcement authorities to:

  1. Access users’ files, messages, and emails on any server anywhere in the world.
  2. Give data from U.S. servers to foreign authorities, in certain situations.

Politicians and Big Online Businesses Are Happy About The Cloud Act

A supporter of the bill, Orrin Hatch, opined:

“The CLOUD Act bridges the divide that sometimes exists between law enforcement and the tech sector by giving law enforcement the tools it needs to access data throughout the world while at the same time creating a commonsense framework to encourage international cooperation to resolve conflicts of law.”

What do the big online players (Microsoft, Facebook, Google, Apple, Yahoo!) think of the new Internet law? They seem to be for it. In a joint statement, the big 5 enthused:

“The new Clarifying Lawful Overseas Use of Data (CLOUD) Act reflects a growing consensus in favor of protecting Internet users around the world and provides a logical solution for governing cross-border access to data. Introduction of this bipartisan legislation is an important step toward enhancing and protecting individual privacy rights, reducing international conflicts of law and keeping us all safer.”

Cryptocurrency Investors and the ACLU Are NOT Happy About The Cloud Act

Cryptocurrency investors, however, aren’t thrilled with the new law.

“The CLOUD Act passed. It destroys privacy globally, so it had to be snuck into the $1.3 trillion omnibus without debate. Encrypt. Encrypt. Encrypt. Go Dark. When privacy is criminalized, only criminals have privacy. We got sold out, again,” remonstrated industry author Andreas Antonopoulos.

The American Civil Liberties Union (ACLU) also isn’t a fan of the new legislation, noting, in particular, its infringement on Fourth Amendment rights.

Connect With A Cryptocurrency Lawyer

Are you a blockchain company or cryptocurrency investor worried about how the CLOUD Act could affect your business or personal investments? If so, give us a call. We’ll review the situation and lay out several options.

Gordon Law is a leading cryptocurrency law firm that handles all manners of situations and solves all manners or fintech problems. We know all the legal ins-and-outs of the token investment market.

Get in touch today to begin the conversation.

Blockchain Re-brands Spawn Investor-Led Class Actions

blockchain re-brands spawn class actionsSeveral large companies are forcibly redirecting their brands onto Blockchain Boulevard, but not all stockholders are on board, which has spawned some blockchain class action lawsuits. In this post, we take a look at one of these blockchain re-brands, in particular: Riot Blockchain, a company currently wading through legal fallout after its metamorphosis from biotech to blockchain.

Blockchain Re-brands: From Beverages, Bras, and Biotech to Blockchain

Back in the day, Long Island Ice Tea peddled flavored beverages in bright packaging. These days, the company changed its name to Long Blockchain Corp. and concentrates on “exploration of and investment in opportunities that leverage the benefits of blockchain technology.”

Same goes for Kodak and SkyPeople Fruit Juice.

Blockchain Re-brands: At First, Plaudits

Let’s get back to Bioptix — the brand transformer currently grappling with a blockchain class action.

When the company first announced its transition to token mining and acquisition, the market applauded. By the end of 2017, the company’s stock price had soared from $8 to $38. The future looked blockchain bright.

Blockchain Re-brands: The Fall

But the champagne toasts didn’t last long. Instead, the SEC came in hot with questions and concerns. Blockchain Riot’s stock price plummeted to about $10, which prompted some investors to pull the reins and prepare legal pitchforks.

And then news hit that John O’Rourke, one of the company’s head honchos, offloaded over 30,000 shares ($869,000) ten days after the stock hit its $46.80 zenith. (Denver Post)

But according to O’Rourke, it’s all a big misunderstanding. Tax and contractual purposes, he insists, were the impetus for his actions. “Basically, I sold less than 10 percent of my overall position. And I was doing it for tax obligations,” explained O’Rourke. “I could have sold more stock, but at the time, I sold what I needed,” he defended.

Blockchain Re-brands: The Class Actions

Soon after O’Rourke’s stock sales became public knowledge, litigation speculation tittered on the tongues of the commentator class.

Now, three different class actions are underway.

Did the company mislead investors about both O’Rourke’s moves and blockchain’s profit potential? That’s the class’ claim. Specifically, investors are concerned about “share-price manipulation through a dubious cryptocurrency pivot.” Additionally, shareholders seem anxious about executives’ ability to successfully transition the company. Were the principals deliberately hyperbolic about their understanding of the blockchain and crypto markets? According to the class, the plunging stock price raises the question.

“Riot lacked a meaningful business plan with respect to the cryptocurrency business and had only minimal investments in cryptocurrency products; the Company changed its name to Riot Blockchain, Inc. as part of a scheme to capitalize on public interest in cryptocurrency products, thereby driving up the Company’s stock price and enriching inside shareholders.”

Authorities Are Keeping A Sharp Eye On Businesses Doing A Blockchain Re-Brand

Riot Blockchain probably won’t be the only company weathering blockchain class actions. According to the Wall Street Journal, regulators are keeping a sharp eye on companies that“shift their business models to ‘capitalize on the perceived promise’ of the blockchain business.”

Connect With A Blockchain Lawyer

The Gordon Law Group works with businesses and individuals on various cryptocurrency tax and blockchain business matters. Got a legal question or quandary involving a digital currency, smart contract, or other blockchain components? We can help. We also work with blockchain startups on compliance matters.

Get in touch today. Let’s get to work.

FTC Cryptocurrency: Marketing Rules Apply

FTC cryptocurrency lawyerThe FTC is going after four people for allegedly promoting “deceptive money-making schemes involving cryptocurrencies.” According to commissioners, the accused promised dramatic gains and delivered squat.

FTC Cryptocurrency: Token Investment Ponzi Scheme?

The FTC accused three defendants of creating a crypto pyramid scheme that promised “big rewards for a small payment of bitcoin or Litecoin.” Specifically, the business’ marketing materials tempted potential investors to turn $100 into $80,000 a month. To join, participants had to make a payment to extant investors. As such, the scheme’s success relied on a constant stream of new investor recruits.

According to the FTC, the scheme leaped out of Ponzi’s playbook, in large part because “the majority of participants would fail to recoup their initial investments.”

When asked about the Crypto Ponzi case, the acting director of the FTC’s Bureau of Consumer Protection Tom Pahl explained :

“This case shows that scammers always find new ways to market old schemes, which is why the FTC will remain vigilant regardless of the platform – or currency used. The schemes the defendants promoted were designed to enrich those at the top at the expense of everyone else.”

FTC Cryptocurrency: Promotional Language Matters

In these recent FTC cryptocurrency actions, commissioners also objected to promotional assertions about doubling your money in 50 days. Remember: Don’t publish guarantees that your business can’t fulfill — it’s against FTC regulations (link). When it comes to marketing materials, faking it till you make it is not OK. All advertising claims must be factually supported with evidence.

While these cases wend their way through the courts, the FTC froze the defendants’ assets and issued temporary restraining orders.

Connect With An FTC Cryptocurrency Lawyer

The cryptocurrency and blockchain markets are relatively young, mostly unregulated, and growing like a Chia Pet on steroids.  If you’re a startup or investor in the space, it’s wise to consult with a cryptocurrency attorney before making moves or launching a project. Though specific industry regulations are currently in limbo, some standing financial, promotional, and business regulations absolutely do apply.

We have been consulting — and investing — in the virtual currency space since the early days of Bitcoin. Moreover, as both attorneys and CPAs, our firm has a unique, holistic, and more nuanced understanding of the crypto ecosystem.

Give us a ring. Let’s talk about what our experienced cryptocurrency legal team can do for you.

Cryptocurrency Tax Write-Offs and “Trader” Tax Designations

cryptocurrency tax write-offs lawyerThe new tax code is raising lots of questions, including: Should Bitcoin investors register as “traders” to save on taxes? And “What cryptocurrency tax write-offs are available?”

You’re busy, so let’s break this down, quickly.

Cryptocurrency Tax Write-Offs: How It Used To Work

Under the old tax code, using miscellaneous deductions, some cryptocurrency entrepreneurs could write off expenses (i.e., Internet costs, computers, subscriptions, etc.) that exceeded 2% of their adjusted gross income. However, the new tax code doesn’t accommodate the tactic.

Cryptocurrency Tax Write-Offs: Switch To “Trader”?

Since the new tax code doesn’t allow for the same itemized blockchain-related deductions, people are asking if they should register as “traders,” to take advantage of benefits delineated in Tax Topic 429, which absolves traders from paying tax on gains derived from qualifying securities trades.

Is it a viable option that makes financial sense? Depends.

Due to the 2% threshold, a limited number of people saw significant benefits from deductions. Moreover, most folks likely won’t meet the requirements to become a professional, registered trader. Entities that do enough token trading to qualify as a cryptocurrency hedge fund, however, may want to explore the possibility.

And lest we not forget: The SEC has yet to move Cryptocurrencies, in an of themselves, under the securities umbrella.

Connect With A Cryptocurrency Tax Lawyer

The IRS and SEC are currently laser-focused on the digital currency scene and aggressively pursuing ICO fraud and crypto tax evasion.

Get in touch with the cryptocurrency tax law team at Gordon Law. We can handle all your digital currency reporting needs, including calculations and figuring out the best money saving position for your exact situation. Get in touch today to start exploring your options.

Coinbase, The IRS, and Cryptocurrency Law

cryptocurrency tax lawyer
The IRS and Cryptocurrency: Will the agency cross-reference Coinbase records with tax returns?

You’ve probably heard the news by now: Several months back, a federal California court forced Coinbase to fork over account records. The ruling means that IRS agents can now identify people who’ve bought and sold over $20,000 worth of BTC between 2013 and 2015. What does that mean for token investors and traders? It may be time to consult a crypto tax attorney.

The IRS and Cryptocurrency: Uncle Sam Wants His Cut

According to the IRS, about 900 people declared digital currency gains between 2013 and 2015 — which is a far cry from the 14,000 accounts affected by the Coinbase decision. The discrepancy is glaring; our guess is that a whole lot of people will start getting letters from the IRS asking about crypto holdings.

Folks who have already made a good-faith effort to report cryptocurrency gains probably have nothing to fear. But if you’ve willfully been hiding assets, it’s probably time to consult a tax attorney who is up-to-date on digital currency; because as it stands now, the IRS views tokens as a taxable commodity.

State and Federal Politicians Are Mulling Over Potential Crypto Laws

Recently, several representatives in the House introduced a bill that would tax exempt crypto transactions under $600. In other parts of the House, another group of lawmakers is considering a bill that would empower border agents to probe, “How much crypto do you have in your wallet?”

Cryptocurrencies also have state legislators scrambling — and they’re approaching the issue from completely different corners of the ring. Some jurisdictions are positioning themselves as “consumer advocates” and trying to implement what they see as fraud-deterring regulations. Other states are clearing their law books of potential regulatory obstacles, as they see crypto and blockchain as “the next Internet.”

What Does All This Cryptocurrency Regulatory Movement Mean?

All this regulatory movement has cleaved a philosophical split in the sector. One faction of the crypto community thinks it’s a travesty. Others insist it’s a harbinger of widespread acceptance that will spur industry investment and innovation.

At the risk of sounding non-committal, there are merits to both viewpoints, but the looming question remains: Can lawmakers craft responsible legislation that both protects consumers and buoys the burgeoning blockchain industry? Time will tell.

Connect With A Cryptocurrency Lawyer

Do you need a crypto lawyer? If yes, you’ve landed in the right place. Our firm, Gordon Law, handles all manners of cryptocurrency issues — from the transactional to litigatory. We can walk you through an ICO or represent you in a crypto-tax entanglement with the IRS. Get in touch today to begin the conversation. Consultations are free.

Should Cryptocurrency and Blockchain Startups Be Eyeing Belarus?

Belarus cryptocurrency tax advantages
Belarus wants to become a cryptocurrency hub. Would it work for your startup?

Belarus’ looooooooooong-time president, Alexander Lukashenko, is re-branding himself as a pioneering cryptocurrency politician. Lukashenko, who has retained power in the former Soviet enclave for over 24 years, declared that “Belarus will become the first government in the world that opens wide opportunities for the use of blockchain technology.” Vsevolod Yanchevsky, one of the country’s tech luminaries, is also sold on the idea, raving in a recent interview, “Belarus will be one of the best jurisdictions in the world for cryptocurrencies and blockchain.”

Belarus to Blockchain and Cryptocurrency Startups: Incorporate Here and We’ll Wave Your Taxes

So, what is Lukashenko’s plan to transform Belarus into a digital currency kingdom? Easy:

Lukashenko seems confident in the vision, optimistically opining: “We have every chance of becoming a regional center in this area.”

Visions of ICOs are also dancing in the leader’s head, and his government is already contemplating ways to thwart would-be crypto criminals, including capital requirements and smart contract standards.

Could Belarus’ Cryptocurrency Dreams Become Reality?

Does Belarus have a shot at turning this idea into reality?

It does.

Over the past decade, several of the post-Soviet states have made significant technological strides. Especially Belarus; it’s home to World of Tanks, the phone messaging system Viber, and EPAM Systems. Alphabet — Google’s holding company — has even snatched up several Belarus startups.

Praise established, Belarus’ plan could also hit some roadblocks, due to conflicting statutes and the current global political climate.

Legal Options For Cryptocurrency Companies

Is your blockchain or cryptocurrency business at a crossroads? Trying to decide where, what, when, and how?

Our digital currency legal team can help. We’ll figure out everything from the best place to incorporate, ICO particulars, and even the ideal tax reporting plan.

Gordon Law Group maintains Internet law, tax, accounting, and cryptocurrency divisions — making us an ideal choice for exchanges, wallets, established fintech businesses, and blockchain startups.

Get in touch today to begin the conversation.

Article Sources

Kudrytski, A. (2017, December 22). Europe’s last dictator wants to be its cryptocurrency king. Retrieved January 31, 2018, from http://www.smh.com.au/business/markets/europes-last-dictator-wants-to-be-its-cryptocurrency-king-20171222-h09m14.html

Brexit Takes A Backseat: UK Adopting EU-Wide Cryptocurrency Regulations

cryptocurrency tax lawyerLike the rest of the world, UK finance authorities are laser-focused on cryptocurrency, and despite Brexit, plan to adopt EU regulations. Will the new guidelines wallop the industry? Some folks predict regulatory doom. But others insist the new rules are a quasi-official approbation that will ultimately carry the digital currency market skyward.

The Rise of Bitcoin, Et Altcoins

2017 may have had 99 problems, but Bitcoin wasn’t one. The Grand Poobah of digital monetary systems, over the past 12 months Bitcoin’s value increased by 1,000%. Early adopters are drunk on their prescience, while old-guard skeptical luminaries are loudly sewing doubt (though quietly investing in blockchain technology).

Why Are Nations Worried About Cryptocurrencies? Should They Be?

Why are governments leery of cryptocurrency? In two words: power and crime. Digital money systems are created and traded using decentralized blockchain technology — decentralized being the operative word. Since cryptocurrencies aren’t dependent on a central source, like fiat currency financial institutions, “the people” are in control as opposed to a bank or government — a dramatic reversal to how things currently work. The decentralized nature means current banking institutions stand to lose their exalted spot in the finance hierarchy. It would also mean that governments risk losing significant control of financial markets.

Visions of cyber-crime are also dancing in regulators’ heads. Many folks believe that, because of its decentralized nature, encryption, and anonymous operational standard, cryptocurrencies are powerful arrows in ne’er-do-wells’ quivers.

But are these fears valid? The evidence suggests not. Yes, hackers have compromised ICOs and a handful of unlucky exchanges, but so far as analysts can decipher, underworld figures have yet to adopt digital money systems. Nevertheless, it’s a national security concern.

UK Vows To Adopt EU Cryptocurrency Regulations

Despite its imminent exit from the EU, UK’s economic secretary of the treasury, Stephen Barclay, made it clear that Great Britain intends to adopt amendments to the Anti-Money Laundering and Counter Terrorism Financing regulations. Still under consideration, plans are afoot to hold cryptocurrency businesses — like wallets, exchanges, and ICO-funded startups — to the same standard as traditional finance businesses. Ultimately, under the new rules, crypto traders will be required to disclose their identities in certain situations and firms will be forced to conduct due diligence on buyers and investors.

Is Cryptocurrency Regulation A Boon or Bust?

Are cryptocurrency regulations a good thing? It depends on who you ask. One school insists that any government interference, at this point in the crypto market’s metamorphosis, will hamstring efforts and halt innovation.

Other folks see the situation differently. Take Nicholas Gregory, CEO of CommerceBlock. In an email to Business Insider, he reasoned: “What some will bill as censure, the cryptocurrency community will deem as a stamp of approval that finally recognizes the pivotal role that digital currencies will ultimately hold for the global economy.”

Are You Operating On The Right Side Of The Cryptocurrency Regulatory Fence?

As the industry skyrockets, legislators are passing new rules and regulations affecting the blockchain industry. Some, like New Hampshire’s new digital currency law favors crypto startups. Others, like New York’s licensing requirement, add an extra step to the startup process.

If you’re in any way involved in an Initial Coin Offering or other type of cryptocurrency business, it’s time to get a regulations audit. The IRS has crypto on the mind, and the SEC is also sniffing around. Some laws do, now, apply.

Our team works with entrepreneurs, startups and businesses in the blockchain space. We’ll guide you through any cryptocurrency regulatory mazes — and assist with any crypto-tax matters.

Cryptocurrency Tax:
A Plain English Q & A

cryptocurrency tax lawyerBlockchain computing and its prized children, cryptocurrencies, are the latest market Sirens. Sure, some skeptics insist Bitcoin is a big ‘ole bubble on the verge of busting; regardless, the burgeoning niche continues to sink its claws into the traditional finance establishment.

And like the Iron Bank of Bravos, the IRS will have its due.

Below, we’ll review a few fundamental cryptocurrency tax legalities. If, after reading, you still have questions, by all means, get in touch. (The consultation is free.)

Cryptocurrency Tax Q & A

Do I have to pay taxes on cryptocurrency gains?

In a word, “yes.” Rumors swirl that digital currency gains aren’t taxable. To be clear: this is inaccurate. Anybody who has taken part in a crypto-to-fiat — or crypto-to-crypto — trade must include resultant gains in their income calculation.

What does that mean, exactly? In the simplest terms, if you purchased Bitcoin for $500, and then sold it for $10,000, you’re required to report a $9,500 gain. In certain circumstances, however, there are ways to deduct from the taxable value.

Head’s up: A federal court recently compelled Coinbase — a well-trafficked token exchange and wallet service — to fork over information, to the IRS, about 14,000 (or so) accounts that exceeded $20,000 worth of trades between 2013 and 2015. And on December 29, 2017, Coinbase announced that it would file Form 1099-K with the IRS for customers that had more than 200 receipt transactions amounting to greater than $20,000 during the taxable year.

How does the IRS classify cryptocurrency?

In the eyes of the Internal Revenue Service, cryptocurrencies are considered property — a piece of property with a fluctuating commercial value. When a party trades one commodity for another, authorities tax the dollar differential.

Has the Internal Revenue Service written any guidelines about cryptocurrencies?

Yes, the IRS maintains a Virtual Currency Issues Team; and yes, said team produced some guidelines about cryptocurrency tax issues, which they suggest be followed.

Notice 2014-21 is an IRS guide that covers various crypto legalities, including paying employees with virtual funds and the agency’s take on certain types of token trades.

In 2016, the nation’s tax czars also published a report entitled “As the Use of Virtual Currencies in Taxable Transactions Becomes More Common, Additional Actions Are Needed to Ensure Taxpayer Compliance,” which you can read here. If you don’t have the time to wade through IRS legalese, never fear, we’ve already done it for you. So, get in touch.

What if I use an overseas cryptocurrency exchange or wallet, must I still pay U.S. taxes on it?

Exceptions exist, but in most cases, offshore cryptocurrency holdings are still subject to stateside taxation. In fact, the IRS has a history of filing — and winning — John Doe warrants that compel foreign banks to hand over identifying information about accounts tethered to U.S. citizens. Officials have relied on the process for decades. Now, the IRS is using it to unearth Bitcoin and altcoin holdings stashed overseas.

In some cases, crypto holdings may be subject to Foreign Bank and Financial Accounts Reporting (FBAR) requirements. Failure to file can result in serious fines — and in extreme cases, sometimes even jail.

Is it possible to use like-kind positions for token-to-token exchanges?

Is it possible? Sure — for the 2017 tax year. Is it a fail-safe tactic? No, it’s not. For starters, for a like-kind position to work for cryptocurrencies, you’d generally utilize a qualified intermediary to act in a quasi-escrow role to swap the two properties without first converting to a fiat currency. Moreover, you must disclose the swap, and the IRS ultimately gets to accept or reject it. And at this point in the game, it’s more likely that it’ll choose the latter.

And while some people may be able to arrange a like-kind swap for their 2017 filings, the new tax code replaces “property” with “real property” in IRC Section 1030(a)(1). In other words, only real estate will qualify for like-kind swaps of this kind.

Why is the IRS laser-focused on cryptocurrency?

The Internal Revenue Service cares about one thing and one thing only — collecting as much tax as possible. Since cryptocurrencies are on the rise, the IRS wants its take.

In addition to tax revenue, the government seems concerned about the money laundering potential of digital money systems. Since digital tokens don’t have material-backing, authorities feel it is ripe for white collar crime activity. However, evidence to this end has yet to bear fruit.

What are some common challenges when it comes to reporting cryptocurrency gains for tax purposes?

Since cryptocurrency is relatively new — at least in comparison to fiat currencies — some confusion still lingers regarding how to report gains correctly.

For example, values are tough to pin down in token-to-token trades; moreover, worth changes by the second. Another hurdle: many exchanges don’t issue 1099s, which means every investor is responsible for their calculations.

All that said, so long as you make a good-faith attempt to report digital currency gains, you shouldn’t fear the Tax Man.

Why are some Bitcoin holders looking for off-shore “crypto havens”?

Bitcoin’s value is on a sky-bound trajectory, many a millionaire has been made, and some are looking to extract as much fiat currency as possible without incurring colossal tax penalties. Vehicles are popping up, seemingly constructed with Bitcoin Billionaires in mind. Small island tax shelters, like Vanuatu, have developed Bitcoin-for-citizenship programs. Moreover, individuals with a crypto-heavy portfolio are using various loan agreements that have beneficial tax implications.

In addition, for US persons opportunities exist in places such as Puerto Rico to receive reduced tax rates.  It’s a complex space, but possible.  Get in touch with us to learn more.

Connect With A Cryptocurrency Tax Lawyer

Cryptocurrencies are quickly becoming part of the mainstream marketplace. If you’re concerned about adequately reporting virtual currency gains — as an individual or for a business — give us a call. As both tax and Internet law attorneys, we understand every angle of the cryptocurrency tax puzzle. Get in touch today; the consultation is free; let’s figure out how best to report your cryptocurrency holdings and craft a way to save you money.