With US federal regulators taking an increasingly close look at Bitcoin and other cryptocurrencies, here’s a short roundup of some recent Bitcoin-related news from the regulatory arena.
CFTC May Form Virtual Currency Subcommittee
The Technical Advisory Committee of the Commodity Futures Trading Commission (CFTC) held a meeting last week to discuss issues related to blockchain and cryptocurrencies. The committee saw testimony from a number of interested parties with respect to cryptocurrencies and their regulatory treatment.
At the conclusion of the meeting, the committee voted to recommend that CFTC create a new subcommittee that would focus on virtual currencies. While CFTC’s jurisdiction over Bitcoin is limited to futures, and CFTC has so far taken a hands-off approach to Bitcoin regulation, formation of a virtual currency subcommittee could lead to additional regulation in the future.
SEC Suspends Trading of Three Blockchain-Related Stocks
In conjunction with warnings to investors about pump-and-dump schemes, the Securities and Exchange Commission (SEC) has also warned investors to be wary of companies that advertise their newfound acceptance of blockchain and cryptocurrency technologies. Given the hype surrounding many new cryptocurrency projects, investors may be tempted not to do their due diligence and invest in companies with unproven track records just because they are engaged in Bitcoin-, blockchain-, or cryptocurrency-related business.
The SEC late last week suspended trading in three penny stocks issued by companies whose press releases touted the companies’ acquisition of assets from a subsidiary of a private equity investor in cryptocurrency and blockchain technology. SEC likely believed that the penny stocks could have been part of a pump-and-dump scheme and suspended trading to stymie any likelihood that that might be the case.
Paying Taxes on Cryptocurrencies?
Personal finance company Credit Karma reported that out of 250,000 people who had used the company’s tax-filing services, fewer than 100 people reported any gains from cryptocurrency trading. That’s less than 0.04%.
Given the number of people with Coinbase accounts and the surge in popularity of Bitcoin, it’s almost certain that the percentage of taxpayers who owe taxes on their cryptocurrency trading is far higher. It’s probably only a matter of time before IRS starts hunting down cryptocurrency owners and assessing back taxes on major gains from Bitcoin and other cryptocurrencies.
Thankfully Bitcoin IRA investors by and large won’t have to worry about paying taxes on their holdings any time soon, as Bitcoin IRAs allow for deferral of taxation until distribution. That allows investors to continue to make gains tax-free until they elect or are required to take a distribution, greatly simplifying the amount of stress and paperwork that they have to deal with.