gut;1884039 wrote:This is what makes absolutely no sense with crypto currencies as an investment - $80B in market cap, but trades like a penny stock.

You're not wrong. The ability to buy "fractional shares" that can be essentially as small as you'd like just seems to lend itself to that kind of thing.

Well, this might be driving the recent sell-off:
https://gizmodo.com/the-irs-has-come-knocking-at-bitcoins-door-1820877550

It's possible.

Still, attempting to go after someone who has bought would be silly unless you're willing to track how, where, at what times, and in what quantities it's sold as well. Trying to track the "profit" from it would be nearly impossible unless it's being re-exchanged for USD at Coinbase.

If you buy 0.5BTC at a given rate and then resell 0.5BTC back to the same exchange, then sure.

But, if you buy 0.5BTC, diversify some of it into Monero, Litecoin, Golem, Etherium, etc., use some of it to pay for website hosting, sell some of it on another exchange, and then accidentally lose your BTC wallet, there's no real way to track all that and come up with an accurate number for income tax purposes. It will be, in practice, like trying to monitor and audit an all-cash business.

This is true particularly since at the moment of exchange, you haven't really gained or lost anything. You've just traded one currency for another. As such, timing comes into play.

But this is, I think, what we probably should have expected when a regulatory body tries to regulate something that was created to not be regulated.

O-Trap;1884126 wrote: But, if you buy 0.5BTC, diversify some of it into Monero, Litecoin, Golem, Etherium, etc., use some of it to pay for website hosting, sell some of it on another exchange, and then accidentally lose your BTC wallet, there's no real way to track all that and come up with an accurate number for income tax purposes. It will be, in practice, like trying to monitor and audit an all-cash business.

LOL, I don't think you understand how the IRS works :laugh:

They will come-up with what they believe the gain is, and issue penalties and fines. The burden will be on the user to prove a different number. Going so far as a full blown audit of banking and property records, there are probably some pretty nervous criminals right now.

gut;1884128 wrote:LOL, I don't think you understand how the IRS works :laugh:

Of course. What was I thinking? I was assuming the IRS would come up with something that actually made sense. :rolleyes:

Even still, it will be REALLY easy to circumvent this. Not retroactively, necessarily, but going forward.

O-Trap;1884129 wrote:Of course. What was I thinking? I was assuming the IRS would come up with something that actually made sense. :rolleyes:

Even still, it will be REALLY easy to circumvent this. Not retroactively, necessarily, but going forward.

This sounds remarkably naive to me. My money is on the FBI/NSA tracking down any bitcoin user they want.

gut;1884130 wrote:This sounds remarkably naive to me. My money is on the FBI/NSA tracking down any bitcoin user they want.

"Track down" implies a trail, though. The tech behind this negates an actual trail to track, so long as some precautions are taken.

Again, it's pretty similar to digital cash. If I hand a drug dealer cash, and he hands me something illicit, and the police are actively watching or have recorded video of the event, then I can still be busted, but the transaction ITSELF doesn't have a trail.

It's not altogether dissimilar with cryptocurrencies. If authorities have been able to determine an individual's wallet ID, as well as the identity of whoever they are getting BTC from or sending it to, then the actual transactions can be tracked.

Otherwise, however, you can see the transaction on the blockchain, but not the parties involved, because buying a wallet typically doesn't require personal information, but is the only thing recorded.

Now, lest I came off as naive, I'm under no impression that things like RATs, keyloggers, malware, IP sniffing, shelf babies, phishing, etc. cannot be used to acquire a specific person's wallet ID. There CAN be a trail given those means. I'm merely saying that the trail doesn't come from the transaction itself like it might with a wire transfer, credit card transaction, or grandma sending her favorite grandson $20 over PayPal for his birthday.

O-Trap;1884133 wrote:"Track down" implies a trail, though. The tech behind this negates an actual trail to track, so long as some precautions are taken.

First off, the vast majority of criminals aren't nearly smart enough to take necessary precautions. And even if they did, it's simply NOT completely anonymous. Claiming a digital history with a self-contained complete record is fool-proof anonymous is actually quite comical.

There IS a trail, which I think you acknowledge, so I'm not sure why you're arguing....aside from the fact that [not] being anonymous and [not] being hidden from the IRS are the two biggest justifications cited by fanboys propping it up.

O-Trap;1884126 wrote:It's possible.

Still, attempting to go after someone who has bought would be silly unless you're willing to track how, where, at what times, and in what quantities it's sold as well. Trying to track the "profit" from it would be nearly impossible unless it's being re-exchanged for USD at Coinbase.

If you buy 0.5BTC at a given rate and then resell 0.5BTC back to the same exchange, then sure.

But, if you buy 0.5BTC, diversify some of it into Monero, Litecoin, Golem, Etherium, etc., use some of it to pay for website hosting, sell some of it on another exchange, and then accidentally lose your BTC wallet, there's no real way to track all that and come up with an accurate number for income tax purposes. It will be, in practice, like trying to monitor and audit an all-cash business.

This is true particularly since at the moment of exchange, you haven't really gained or lost anything. You've just traded one currency for another. As such, timing comes into play.

But this is, I think, what we probably should have expected when a regulatory body tries to regulate something that was created to not be regulated.

"Just Trading One Currency For Another" has always generated taxable income per the IRS.

Bitcoins and other "nonfunctional currencies" will get the same tax treatment as all other gains and losses from the trading of all other "nonfunctional" foreign currencies with the gain or loss being the difference in the exchange rate between acquisition and disposition.

Moreover, because of the blockchain, it will actually be much easier for regulators to trace and prove and prosecute crime in comparison to cash IMHO.

gut;1884166 wrote:First off, the vast majority of criminals aren't nearly smart enough to take necessary precautions. And even if they did, it's simply NOT completely anonymous. Claiming a digital history with a self-contained complete record is fool-proof anonymous is actually quite comical.

There IS a trail, which I think you acknowledge, so I'm not sure why you're arguing....aside from the fact that [not] being anonymous and [not] being hidden from the IRS are the two biggest justifications cited by fanboys propping it up.

Pretty much this. Bank records obtained via subpoena are already key pieces of evidence in fraud crimes and following the money is imperfect. Blockchain is like 10 times better than relying on conventional bank records because of the indelible ledger or what have you. You create an account with an email address from an IP Address at coinbase to get a Bitcoin Wallet? All that info can be obtained via subpoena.

At the end of the day a Wallet ID is just going to be the same as a bank account number and coinbase, etc. gets the subpoena instead of banks.

My hunch is that the myth of anonymity that came with Bitcoin is going to be an element that makes the shoe drop.

gut;1884166 wrote:First off, the vast majority of criminals aren't nearly smart enough to take necessary precautions. And even if they did, it's simply NOT completely anonymous. Claiming a digital history with a self-contained complete record is fool-proof anonymous is actually quite comical.

Eh, I suppose whether or not Average Joe Criminal is both interested in using cryptocurrencies and also adept enough to use a VPN, launder his BTC through other currencies, and pass it through a series of wallets is speculative, so you could be right on the first part, though I'm not sure how you'd know you were right.

As for the latter, its digital history doesn't include identities. What YOU can see on the block chain is what everyone can see on the block chain, the Feds included. There's not some secret back door that they have access to, because there is no more personal info involved anywhere in the process.

gut;1884166 wrote:There IS a trail, which I think you acknowledge, so I'm not sure why you're arguing....aside from the fact that [not] being anonymous and [not] being hidden from the IRS are the two biggest justifications cited by fanboys propping it up.

There's a wallet ID trail. There isn't a personal ID trail in the blockchain. I could give you a wallet ID, but you'd have no way of determining that wallet's owner based on the transaction history.

As I said, there are obviously other ways of trying to figure this out, but they're by finding other vulnerabilities in the person's browsing habits. Not through the transactions themselves.

The justification for using it is, in practice, the same as the justification for being the sort of person who prefers to use cash, except with the one added benefit of being able to use it in more than just face-to-face transactions. The process itself is indeed anonymous. It's the rest of the average person's browsing habits that make it less than anonymous.

For example, I have a few BTC wallets. One BTC wallet ID is 1MdHKK7sZpbbpiojjWEq66QGkR5bHf54Mm. It's not connected to an exchange like Coinbase. It's an offline wallet.

There is nothing in my wallet's settings or in the wallet download process that required me to input any personal information whatsoever, and as a general rule, I use a decent VPN, which is hardly advanced security. The person who downloaded the wallet with that ID could have been me, my neighbors, or some no-name in Montana. As such, the only ways to glean that that wallet is mine are:

(a) Using one of the various forms of digital snooping I referenced previously, or

(b) me outrightly claiming as much, which I've done here.

Also, that wallet ID is exclusive to BTC. As soon as I convert it to something else, the knowledge of that wallet ID isn't so helpful.

BoatShoes;1884170 wrote:"Just Trading One Currency For Another" has always generated taxable income per the IRS.

ForEx, yes. I was more just attempting to point out the need for actual timestamps coming into play when evaluating any actual "profit."

BoatShoes;1884170 wrote:Bitcoins and other "nonfunctional currencies" will get the same tax treatment as all other gains and losses from the trading of all other "nonfunctional" foreign currencies with the gain or loss being the difference in the exchange rate between acquisition and disposition.

Moreover, because of the blockchain, it will actually be much easier for regulators to trace and prove and prosecute crime in comparison to cash IMHO.

To be sure, the blockchain provides a hub for monitoring transactions, but you'd still need to have figured out the "nodes" in order to actually use it, and that can't be done through the blockchain itself.

BoatShoes;1884171 wrote:You create an account with an email address from an IP Address at coinbase to get a Bitcoin Wallet? All that info can be obtained via subpoena.

That's all true, but it's not complete.

First, in order for a subpoena to matter, you'd have to find the right exchange(s). Maybe I don't buy from Coinbase. Maybe I buy from Coinsbank, Bitbay, Bitfinex, Coindesk, Poloniex, Cryptopia, or any of the other hundred or so exchanges.

Also, if you use any exchange, then you have a wallet at that exchange. Upon purchase, you have to have a place to put the BTC, after all. But most people don't keep their BTC in the wallets linked to the exchanges. You can, and many say you should, have an "offline" wallet where you transfer any BTC after purchase. The one I referenced above is one of my offline BTC wallets, but even I have several, and I'm not really very deep into crypto.

I downloaded the above wallet from Exodus.io, which has become one of my favorite wallets. I essentially always use a VPN, so the IP on record probably won't even be an Ohio one. And it didn't require an email address or any other form of information.

BoatShoes;1884171 wrote:At the end of the day a Wallet ID is just going to be the same as a bank account number and coinbase, etc. gets the subpoena instead of banks.

My hunch is that the myth of anonymity that came with Bitcoin is going to be an element that makes the shoe drop.

As mentioned above, that's really not how it works. With such a subpoena, you could see how much BTC was purchased, but most people will show about 100% of the purchased BTC go out to other offline wallets. As such, while that sort of a subpoena could see how much was purchased, it would likely see that same amount leaving the wallet minutes after purchase, and the wallet will have a standing balance of near $0.

For example:


The standing portfolio has about $0.02 USD value, whereas anything that has come in has essentially gone out very shortly after. To where has it gone? Well, Coinbase can tell you the wallet IDs to which it has gone, but they cannot tell you who owns those wallets or why it was sent. Beyond that, if we get into converting between cryptocurrencies, it gets even hairier. If, for example, I converted some into Monero, some into Litecoin, and some into Etherium, each one's block chain tracks differently.

Essentially, subpoenaing Coinbase won't show you how much I'm holding at all. Just how much I've purchased.

Now, I'm okay with sharing my own, because (1) I don't have nearly enough for the IRS to be interested in coming after me, and (2) I'm not doing anything illicit.

But at the end of the day, short of placing digital snooping tools on the machine on which I have my wallet or me outrightly telling someone, the only person who can know how much I currently have (ie, haven't spent or given before making any real profit) is me.