Crypto

Five Things You Need To Know About Cryptocurrency And Taxes

Published

2 years ago

March 16, 2023

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Five Things You Need To Know About Cryptocurrency And Taxes

Cryptocurrency on Binance buying and selling app

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With the tax deadline only a few weeks in the past—Tax Day is April 18—taxpayers are scrambling to complete and file their returns. One factor that could be inflicting some confusion this 12 months? Cryptocurrency. Whereas it isn’t a brand new tax subject, conflicting recommendation about losses and completely different wording on Type 1040 are leading to some head-scratching. Listed below are 5 issues it’s essential learn about cryptocurrency earlier than you file your tax return.

Examine The Field

The IRS is getting severe about cryptocurrency—er, digital belongings. This 12 months, the query close to the highest of your Type 1040 asks, “At any time throughout 2022, did you: (a) obtain (as a reward, award, or fee for property or providers); or (b) promote, alternate, reward, or in any other case get rid of a digital asset (or a monetary curiosity in a digital asset)?”

IRS Type 1040 for 2022

IRS/KPE

In keeping with the IRS, “digital belongings are any digital representations of worth which can be recorded on a cryptographically secured distributed ledger or any comparable know-how.” That features non-fungible tokens (NFTs) and digital currencies, comparable to cryptocurrencies and stablecoins.

And simply in case there’s any confusion, the IRS notes that “if a selected asset has the traits of a digital asset, will probably be handled as a digital asset for federal revenue tax functions.” In different phrases, if it appears like a duck, walks like a duck, and quacks like a duck, it could simply be a duck.

Not each digital asset transaction requires you to tick the sure field. For instance, simply holding a digital asset in a pockets or account, or transferring a digital asset from one pockets or account you personal or management to a different pockets or account that you just personal or management. It additionally does not embrace the acquisition of digital belongings utilizing money or different foreign money, together with by using digital platforms like PayPal
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and Venmo.

Don’t go away the query unanswered. All taxpayers should tick a field, not simply those that engaged in a transaction involving digital belongings in 2022.

Revenue Is Revenue

That is true it doesn’t matter what the revenue appears like as soon as it will get to you. Which means the receipt of cryptocurrency or different digital belongings in alternate for providers is taken into account revenue. That features revenue earned as an worker or as an impartial contractor.

Revenue might also be acknowledged from mining and staking. And if a tough fork is adopted by an airdrop and also you obtain new cryptocurrency, the IRS considers that to be taxable revenue.

However not all transactions end result within the recognition of revenue. In case your cryptocurrency went by a tough fork, and also you didn’t obtain any new cryptocurrency, you do not have taxable revenue to report. Equally, a smooth fork won’t end in any taxable revenue.

Cryptocurrency Is Property

The IRS considers cryptocurrency a capital asset. The company issued steering in 2014, making it clear that capital features guidelines apply to any features or losses.

For those who purchase and promote cryptocurrency as an funding, you may calculate features and losses the identical as while you purchase and promote inventory.
For those who deal with cryptocurrency like money—spending it instantly for items or providers, or utilizing it to purchase different digital belongings—the person transactions might end in a achieve or a loss.

For tax functions, you work your capital features or losses by figuring out how a lot your foundation—usually, the associated fee you pay for belongings—has gone up or down from the time that you just acquired the asset till there’s a taxable occasion. A taxable occasion can embrace a sale, reward, or different disposition.

For those who maintain an asset for a couple of 12 months earlier than a taxable occasion, it is thought-about a long-term achieve or loss. And when you maintain an asset for one 12 months or much less earlier than a taxable occasion, it is thought-about a short-term achieve or loss.

And whereas cryptocurrency goes up and down, you care probably the most in regards to the starting and the tip—what occurs within the center does not really matter. That’s as a result of, for tax functions, when cryptocurrency takes a dive, that does not equal a realized loss. Equally, when it goes again up in worth, that does not equal a realized achieve. To understand a achieve or a loss for tax functions, you could do one thing with the asset, like promote or in any other case get rid of it.

At tax time, you may report any realized features and losses on Schedule D. You needn’t file a Schedule D if you haven’t any realized features or losses—even when the worth adjustments, if there isn’t any sale or disposition, there’s nothing to report.

Losses Might Be Restricted

Like different capital belongings, if any realized losses from digital belongings exceed any realized features, you could have a capital loss. You possibly can declare as much as $3,000 (or $1,500 if you’re married submitting individually) of capital losses in a tax 12 months—the quantity of your loss offsets your taxable revenue. Nonetheless, in case your losses exceed these limits, you’ll be able to carry them ahead to later years, topic to sure limitations and restrictions.

This is how that works. To illustrate that you just realized $3,500 in internet capital losses in 2022. You possibly can deduct $3,000 in capital losses for the 2022 tax 12 months—the return you are submitting now—and carry ahead the remaining $500 in losses to make use of on subsequent 12 months’s tax return.

One thing Is not Nothing

There’s been a number of hypothesis about how one can deal with cryptocurrency that has declined rapidly in worth to the purpose of just about being nugatory. Particularly, it has been advised that in case your cryptocurrency has considerably dropped in worth, you’ll be able to declare it as a loss underneath part 165.

In January, the IRS Workplace of Chief Counsel issued Memorandum 202302011. The “non-taxpayer particular recommendation” confirmed two issues:

For those who lose a lot of the worth of your cryptocurrency, it isn’t nugatory—it nonetheless has worth. That signifies that you do not have a sustained loss underneath part 165.
Even when you sustained an precise loss underneath part 165, the loss could be disallowed as a result of part 67(g) suspends miscellaneous itemized deductions for taxable years 2018 by 2025 (some exceptions apply).

The memorandum references Lakewood Assocs. v. Commissioner, 109 T.C. 450, 459 (1997), claiming, “The mere diminution in worth of property doesn’t create a deductible loss.” In different phrases, if it isn’t wholly nugatory, you continue to personal one thing and there’s no realized loss.

It is price re-emphasizing that the IRS memo is a response to a “request for non-taxpayer particular recommendation,” which signifies that it “shouldn’t be used or cited as precedent.” It does not carry the identical weight as a regulation or regulation. Nonetheless, it does provide perception into how the IRS regards a difficulty, and that is worthwhile data.

Last Ideas

This can be a fast take a look at a few of the most typical cryptocurrency questions—there are actually some extra sophisticated cryptocurrency eventualities not addressed right here.

For those who’re in search of extra data, the IRS has some hyperlinks and FAQs particular to digital belongings on its web site. And whereas the web can provide some helpful recommendation (hey, you are studying this proper now), not all cryptocurrency tax recommendation is created equal. When you’ve got questions, I extremely advocate consulting with a educated tax skilled.

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Crypto

Blockchain Revolution: How Cryptocurrency is Transforming Global Logistics – theafricalogistics.com

Published

2 hours ago

December 22, 2024

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Blockchain Revolution: How Cryptocurrency is Transforming Global Logistics – theafricalogistics.com

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The global logistics industry is undergoing a seismic shift, driven by the integration of blockchain technology and cryptocurrency.

These innovations promise to enhance transparency, efficiency, and security across the supply chain. From tracking shipments to streamlining cross-border payments, the synergy between blockchain and cryptocurrency is setting new benchmarks for the logistics sector.

1. Blockchain’s Role in Logistics

Blockchain technology, essentially a decentralized ledger system, enables secure and transparent recording of transactions. For logistics, this translates into the ability to track goods in real-time, authenticate the origin of products, and mitigate fraud. Key benefits include:

Enhanced Traceability: Every transaction, from the manufacturing stage to delivery, is recorded on an immutable ledger. This ensures that stakeholders have a comprehensive view of the supply chain.
Reduced Paperwork: By digitizing documents such as bills of lading and certificates of origin, blockchain eliminates the inefficiencies of manual processes.
Improved Trust: Smart contracts, self-executing agreements coded on the blockchain, reduce disputes and enhance trust between parties.

2. Cryptocurrency in Cross-Border Transactions

Traditional cross-border payments in logistics are often marred by high fees, long processing times, and currency exchange risks. Cryptocurrencies, like Bitcoin and stablecoins, are addressing these challenges by:

Lowering Transaction Costs: Cryptocurrency transactions bypass intermediaries, significantly reducing fees.
Speeding Up Payments: Transactions settle in minutes, eliminating delays common with traditional banking systems.
Enhancing Financial Inclusion: For businesses in emerging markets, cryptocurrencies provide access to global trade without reliance on conventional banking infrastructure.

3. Use Cases Transforming the Sector

Several real-world applications highlight the impact of blockchain and cryptocurrency in logistics:

Walmart’s Blockchain Initiative: Walmart leverages blockchain to track the origin of produce, ensuring food safety and traceability within its supply chain.
Maersk’s TradeLens Platform: Developed in collaboration with IBM, TradeLens uses blockchain to digitize and streamline global shipping documentation, reducing inefficiencies.
Cryptocurrency-Powered Freight Payments: Startups like Slync.io enable shippers to pay carriers using digital currencies, enhancing payment speed and reliability.

4. Challenges to Adoption

Despite its potential, the adoption of blockchain and cryptocurrency in logistics is not without hurdles:

Regulatory Ambiguities: The legal status of cryptocurrencies varies across countries, complicating implementation.
Scalability Concerns: Processing thousands of transactions per second remains a challenge for blockchain networks.
Skill Gaps: The logistics workforce often lacks the technical expertise to deploy and manage blockchain systems.

5. The Road Ahead

The integration of blockchain and cryptocurrency in logistics is still in its nascent stages but holds immense promise.

Industry players are investing in pilot projects to explore scalability and operational viability. The convergence of these technologies with artificial intelligence and IoT will further revolutionize the sector, enabling predictive analytics, autonomous supply chains, and more.

Conclusion

Blockchain and cryptocurrency are not just buzzwords but transformative tools reshaping the logistics landscape.

By fostering transparency, reducing costs, and expediting processes, these technologies are addressing long-standing inefficiencies in the supply chain.

As adoption accelerates, businesses that embrace this revolution stand to gain a significant competitive edge in an increasingly digital and globalized economy.

Also Read

How cryptocurrency works: A step by step guide

Exploring the potential use cases of Pi Coins post-launch

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Crypto

My Top Cryptocurrency to Buy Right Now (Hint: It's Not Bitcoin) | The Motley Fool

Published

10 hours ago

December 22, 2024

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My Top Cryptocurrency to Buy Right Now (Hint: It's Not Bitcoin) | The Motley Fool

The performance of Bitcoin (BTC -0.53%) this year has been nothing short of extraordinary. It’s now up about 46% since the election on Nov. 5, and 146% year to date. Best of all, Bitcoin recently broke through the $100,000 price level to hit another all-time high just north of $108,000.

But what if I told you that there is another top cryptocurrency that is up more than 120% since the election, and 430% year to date? And that this cryptocurrency also just set a new all-time high? That cryptocurrency is Sui (SUI -3.69%), which now ranks 14th among all cryptocurrencies with a $13 billion market cap.

What is Sui and why haven’t I heard of it before?

If you’ve never heard of Sui, that’s understandable. The cryptocurrency only launched in May 2023, just as the market was emerging from the crypto winter of 2022. So, in many ways, its launch flew under the radar of investors. There were bigger issues to consider. The industry was still coping with the aftermath of the collapse and scandal of crypto exchange FTX in November 2022, and nobody was very interested in hearing about another new cryptocurrency launch.

But fast-forward to August 2024. That’s when 21Shares — the company that partnered with Cathie Wood’s Ark Invest on the launch of spot exchange-traded funds (ETFs) for Bitcoin and Ethereum (ETH -0.79%) — released a research report on Sui, detailing all of its unique characteristics. For example, it described how a new technical upgrade suddenly made Sui faster than any other top blockchain by a substantial margin. It pointed out how Sui was rapidly growing in terms of total value locked (TVL), which is a key metric showing the relative strength of a particular blockchain.

Image source: Getty Images.

The title of the report (“Is Sui a Solana (SOL -0.00%) Killer?”) was very provocative, at least for crypto investors. It suggested that Sui had the technological chops to take on Solana, which now ranks as the fifth-largest cryptocurrency. For several years now, Solana has been positioned as the next Ethereum, so Sui being tabbed as a potential Solana killer is a big deal. In fact, 21Shares suggested that there might be a $68 billion market opportunity for Sui if it was able to take on Solana and win.

How high can Sui go in 2025?

My primary concern right now with Sui is that it may be overheating. Just like Bitcoin, it is smashing through all-time high after all-time high. Right now, Sui is trading at about $4.50 after briefly testing the $5 price level. From the perspective of crypto traders, $5 presents the same psychological price barrier for Sui that $100,000 did for Bitcoin. It took Bitcoin a while to break through the $100,000 level, so Sui may not be able to break through the $5 price level by the end of this year.

But, in 2025, watch out. Just take a look at this comparison chart of Bitcoin and Sui since the presidential election. That leads me to think that the market is very bullish on Sui’s prospects under the Trump administration.

Bitcoin / U.S. dollar chart by TradingView

Moreover, consider the trading volume that Sui is now seeing on Coinbase Global (COIN 1.75%). Sui has become one of the 10 most popular cryptocurrencies on the platform in terms of 24-hour trading activity. Granted, the trading volume in Sui is nowhere near that of Bitcoin or Ethereum. But there’s more activity in Sui than in popular cryptocurrencies such as Chainlink, Litecoin, Cardano, Shiba Inu, and Avalanche.

Best of all, Sui has a major new product launch coming in 2025. It’s a $599 handheld gaming device that is currently available for pre-order online. If that product launch is a success, then it could be off to the races for Sui. It could easily double in price to hit the $10 price level.

This cryptocurrency could soar even higher if it ever realizes its full potential as the next Ethereum. Imagine if you had invested in Ethereum just 18 months after its launch. Most likely, you’d be a crypto millionaire by now. In December 2016, Ethereum was trading around $5, which is roughly where Sui is trading right now. Today, Ethereum trades for about $3,400.

That said, I can’t emphasize enough how speculative Sui is. It is still a baby in crypto terms. It has only been around for 18 months, and it can be difficult to get good data and reliable information about it. So, do your due diligence before investing in Sui, and keep your expectations in check. An investment opportunity like Ethereum might only come around once in a lifetime, so it’s asking a lot for it to happen with Sui as well.

Dominic Basulto has positions in Bitcoin, Ethereum, SUI, and Solana. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, Ethereum, SUI, and Solana. The Motley Fool has a disclosure policy.

Crypto

S. Korea, US conducting joint research to block NK cryptocurrency heists

Published

17 hours ago

December 22, 2024

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S. Korea, US conducting joint research to block NK cryptocurrency heists

A representation of Bitcoin and a price chart are seen in this October 2023 photo illustration. Reuters-Yonhap

South Korea and the United States are conducting joint research to strengthen protection against cryptocurrency heist attempts amid growing concerns of such attacks by North Korea-linked hackers, officials said Sunday.

Based on a recently signed technical annex between the South Korean government and the U.S. Department of Homeland Security, the two sides will jointly develop technologies to prevent cryptocurrency-targeted attacks and to track stolen assets, according to authorities and cybersecurity industry officials.

The science ministry plans to support such research through the Institute of Information & Communications Technology Planning & Evaluation until 2026.

The move comes as the price of bitcoin recently surged to $100,000 after the U.S. presidential election last month, raising concerns of increased attempts by hackers to steal virtual assets.

While the United States collaborates with other countries for cybersecurity research, it is known to have chosen South Korea for research on digital asset tracking technology as North Korea is seen as a key culprit behind cryptocurrency heists.

Under the program, South Korean and U.S. researchers, including those from Korea University and the RAND research institute, will focus on technologies to prevent and track hackers when they steal assets from a cryptocurrency exchange.

They will also focus on understanding how they convert or launder other financial assets they obtain into virtual assets through illegal ransomeware or other methods.

North Korea is known as a major player in cryptocurrency heists, with hackers linked to the country estimated to have stolen $1.34 billion worth of cryptocurrency across 47 incidents this year, according to Chainalysis, a blockchain analysis firm. (Yonhap)