The End of Anonymity and the Start of Tax Hell for Crypto
Almost anything you do in Crypto today requires KYC. And this is only going to get worse as governments push down on exchanges and the Crypto industry. All of a sudden the future is not that bright for anonymity.
Governments are dreaming of removing anonymity from Crypto. They see Crypto as a taxable goldmine and they want to cash in.
It all started so beautifully. Total anonymity. You could mine Bitcoin, Ether or buy AltCoins in ICO’s and then pump-and-dump them with a hefty profit. No one asked you who you were or where you lived.
But all those profits created a new Crypto Aristocracy of billionaires, multi-millionaires and millionaires. And most of them wanted to buy real stuff in the real world. And since you couldn’t back then buy a Lambo, Rolls Royce or Ferrari with Crypto they started converting to fiat.
TL:DR — FIAT money is a currency without intrinsic value that has been established as money, often by government regulation. The $, €, … are fiat currencies.
Conversion to FIAT
And this is where the sh$t hit the fan. It’s perfectly fine to convert smaller amounts, a few thousand dollars and move it from an exchange to a bank account. But once you hit the certain thresholds, bankers become suspicious and start asking annoying questions about the origin of the funds. They are required to do so by law. They have to report suspicious activities as part of the AML compliance regulations.
TL;DR — AML stands for Anti Money Laundering. For larger amounts the client needs to be able explain the source of the funds.
TL;DR — KYC stands for Know Your Customer. Every business, and especially a financial institution, is required by law, to know the identity of each customer.
Crypto, which for a long time was completely ignored, immediately got the interest of financial regulators and central banks. They demanded that any crypto-to-fiat transaction was KYC and AML compliant. Banks had no choice but to close down bank accounts of ICO-funded organisations. Even today its very hard to simply open a bank account or do Crypto related transactions with an existing bank account.
If you want to connect to the financial banking system and operate a bank account, you will need to play by their rules and force all your crypto-clients to go through KYC.
KYC, Exchanges and ICO
Just a few years ago I had no clue what the term meant. The first time I wanted to buy Ether I had to upload my passport, take a photo of myself holding my it together with a page, with the date written on by hand. A horrible and annoying experience. The same KYC requirement popped up everywhere in ICO’s.
I did have second thoughts because I had no clue what would happen with my personal data. But I did it, because I wanted in.
Not a hair on my head ever imagined that my personal information, which I provided simply to execute a few transactions, would be used later on to report my transactions to tax authorities.
Once you pass $20K in transactions, Coinbase will report your transactions to the IRS. It’s just a matter of time before tax authorities worldwide will force Coinbase and all the other exchanges to do the same for any of their citizens.
Welcome to Tax Hell
In this world nothing is certain, but death and taxes.
TL;DR: Poor college kid invests 5k in crypto last year, ends up with 875k short term gains for 2017, lost most of it in 2018, hasn’t paid taxes or filed any returns yet. Coinbase filed a 1099-K form on his behalf. As reported on Reddit.
There is no such thing as anonymity in Crypto. The moment you go through KYC on any exchange or ICO, you can assume that at one point or another the tax authorities will come knocking.
Prepare to be taxed.
Thanks for reading!
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The purpose of ALTCOIN MAGAZINE is to educate the world on crypto and to bring it to the hands and the minds of the masses. This article was written and composed by Alex Kleydints on ALTCOIN MAGAZINE.