The true legal risks of Bitcoin Forks
We all know that there are so many Bitcoin forks are out there! And, many more will be! as you can read here. Is it really legal to offer forked coins to Bitcoin holders, especially in USA? What is the risk in claiming forked coins for US based Bitcoin holders?
Are forks safe because everyone is doing it?
Some people argue that it is perfectly legal and risk free for US based bitcoin holders to receive forked coins! And, their argument is based solely on the fact that a lot of forks offered the fork coins to Bitcoin holders in USA. But that argument is not valid because such giveaways of forked coins to US bitcoin holders may be considered as securities, even if no money was raised by the coin teams.
Taxes, Securities Laws and SESTA!
There may be other issues in US bitcoin holders collecting forked coins. Tax treatment of these forked coins is unclear and that puts them in some legal risk zone. Forking involves copying the existing blockchain of bitcoin (Note: smart forks do not copy blockchain. I will get to that later). It is now public knowledge that the coinbase field of blocks during bitcoin mining is heavily abused and, as a result, bitcoin blockchain contains a lot of offensive content, including child pornography. This means that users who claim forked coins and/or use the full node wallet of the fork are essentially spreading the offensive content of bitcoin! This is not only unethical, but also illegal in USA under SESTA laws (meant to crack down on sex trafficking). If the securities and taxation laws do not scare you, SESTA laws should!
A Fork can turn into a dangerous knife!
While forking is a legitimate technique to improve and further a software project, forking without addressing the legal issues simply puts bitcoin holders in USA (and in probably other countries) at risk. While a software fork unrelated to crypto industry is perfectly safe, a Bitcoin fork can turn into a knife, if you are not careful! It is a shame that there is only one smart fork of Bitcoin (launched recently by a group of crypto geeks) called Bitcoin RM. A smart fork of bitcoin, unlike traditional fork, does not blindly copy existing blockchain of bitcoin. Bitcoin RM team certainly sets a new standard for bitcoin forks. In fact, the team does not issue Bitcoin RM coins to US based bitcoin holders. I hope future bitcoin forks follow the lead of Bitcoin RM in the interest of protecting bitcoin users from ever changing laws of securities, taxation and sex trafficking. We need more smart forks, not traditional forks!
