Category: Blog Row 3 (Member)

Chamber of Digital Commerce Canada Submits Recommendations to Ontario Minister of Finance

by Chamber

Chamber of Digital Commerce Canada Submits Recommendations to Ontario Minister of Finance to Improve Provincial Blockchain Business Ecosystem

Chamber of Digital Commerce Canada Submits Recommendations to Ontario Minister of Finance to
Improve Provincial Blockchain Business Ecosystem

By Tanya Woods, Managing Director, Chamber of Digital Commerce Canada

Feb. 18, 2019

The transformative possibilities of blockchain technology offer tremendous positive impact for economic advancement in Ontario and across Canada.  Increasingly, Canadians are realizing that blockchain technology offers an unprecedented opportunity to improve business processes, increase efficiency, and promote transparency throughout numerous industries. It also can fundamentally reshape ownership of assets, how we interact with each other digitally, and how we transfer value. As a result, its use is reforming the ways in which companies in all sectors conduct business – from financial services, digital identity and privacy, healthcare, insurance, intellectual property, real estate, commerce, and supply chain management. It is clear that blockchain is a revolutionary breakthrough, allowing us to create infrastructure towards an “Internet of Value.”

Ontario is in an enviable position for innovation in blockchain technology, but it does not automatically follow that Ontario will maintain its preeminence. In 2017, blockchain ventures raised approximately $8 billion through token generation events, and in 2018, that number jumped to approximately $27 billion. Two years ago, the entire token market had a value of $11.7 billion. Today, according to CoinMarketCap the token market cap is approximately $162.5 billion in size. Despite rapid cross-sectoral innovation, the blockchain industry continues to confront core implementation and growth challenges with the emergence of an entirely new digital asset class and technology architecture – regulatory risk being a substantial component.

The Chamber of Digital Commerce recently submitted comments to the Ontario Spring Budget Consultation 2019 recognizing Ontario’s promise to create a government ecosystem which would demonstrate to blockchain innovators that the province is “open for business” and ready to “reduce red tape.” Governments around the world at all levels must work to keep pace with the digital innovation ecosystem and demonstrate that they want to harness and attract economic growth from this leading technology and innovation sector.

As a home to thousands of technology businesses, innovators, institutes and investors, Ontario is well-positioned to become a leading global blockchain hub that attracts economic growth and prosperity. To achieve success, the Ontario government will need to simplify, modernize, and harmonize the regulatory requirements applicable to participants in the digital economy. It is imperative that it publicly support blockchain implementation across all sectors, develop a plan to promote coordination across government and enhance the quality and frequency of its blockchain stakeholder collaboration and dialogue. The comments submitting by the Chamber and its member offer suggested paths forward to achieve these objectives.

Chamber Encourages the CFTC and the CFPB to Foster Blockchain Innovation

by Chamber

Chamber Encourages the Commodity Futures Trading Commission and the Consumer Financial Protection Bureau to Foster Blockchain Innovation

Chamber Encourages the Commodity Futures Trading Commission and the Consumer Financial Protection Bureau
to Foster Blockchain Innovation

By Amy Davine Kim, Chief Policy Officer & Paul Brigner, Director of Technology Policy

In comments submitted this week to the Commodity Futures Trading Commission (CFTC) and the Consumer Financial Protection Bureau (CFPB) in separate proceedings, the Chamber encouraged both agencies to foster blockchain innovation and permit the introduction of new financial products based on blockchain technologies.

Our comments to the CFPB on their proposed policy on no-action letters and the product sandbox recognized the potential of both tools to bridge the gap between the deliberate pace of regulation and the rapid pace of innovation, while upholding the principle to first do no harm.  We expressed our broad support for the policy and our strong support for regulatory efforts in the United States that: (i) eliminate unnecessary burdens to apply for access to these tools; (ii) enhance the reliability and practicality of these tools; and (iii) promote coordination among regulators.

Likewise, in our comments to the CFTC, we expressed our broad support for the agency’s efforts with respect to financial products involving virtual currencies through the LabCFTC and a variety of other mechanisms.  While we do not advocate for any particular blockchain technology, we supported the agency’s efforts to learn more about Ether and the Ethereum network as well as the Commission’s self-certification process as the appropriate framework for the introduction of new derivatives, such as those based on Ether.

In comments to both agencies we stressed the need for enhanced coordination among regulators, particularly in light of the byzantine structure of U.S. financial services regulation.  We encourage all financial regulators to collaborate on effective and efficient approaches to achieve regulatory goals while promoting investment and growth.

The Chamber’s comments to the CFPB are available here, and our comments to the CFTC are available here.

Calling on the United States to Implement a National Action Plan for Blockchain

by Chamber

Calling on the United States to Implement a National Action Plan for Blockchain

Calling on the United States to Implement a National Action Plan for Blockchain

 

By Perianne Boring, Founder and President & Amy Davine Kim, Chief Policy Officer

The United States is a leader in developing the Internet, in large part, due to its early policy approach to promote innovation. Despite a myriad of transformational benefits that blockchain and digital assets offer for businesses, government, and consumers, the U.S. government has yet to fully embrace a national, comprehensive blockchain strategy.  The opportunity to do so is rapidly slipping away. Other countries are more enthusiastic in embracing blockchain’s numerous benefits and aggressively focus on creating frameworks conducive to furthering blockchain-based innovations and technologies – so much so that innovators are starting to move to friendlier jurisdictions. It’s time the United States take notice of this growing trend and commit to developing its own frameworks to incentivize the development of blockchain solutions for government and industry.

Affirmative Support from the U.S. Government

While our technological progress is clear, it does not automatically follow that America will maintain its preeminence in the blockchain sector. Already, major industrialized nations are making significant advances in promoting and adopting this technology, making a hard run to be the leaders, and obtain the economic value, of this industry.  We must state, clearly and plainly, at the highest levels of government, that blockchain technology offers important progress for business, government, and consumers, and must be nurtured and proactively supported to ensure its success.  We predict 2019 to be a pivotal year for blockchain. But will U.S. policymakers catch up and embrace strategic policies that promote blockchain innovation here rather than abroad?

Congress Steps In

We have seen glimmers of this support through Congressman Emmer’s legislation promoting blockchain and digital currencies, Congressman Schweikert’s legislation promoting the potential promise of blockchain, and Congressmen Soto and Budd promoting American competitiveness, among others.  These bills, first, need to be reintroduced and passed, and second, need to be acted on.

This call for action extends beyond the U.S. Congress to the Administration to ensure that we realize the commercial and economic benefit of this technology. The U.S. Government needs to indicate its support, both in words and in action, for the development of blockchain solutions.

Lessons from the Internet

To maintain our technological and economic leadership, the United States must invest in its development or risk falling behind to countries whose respective governments are embracing the technology and exploring its benefits. Almost two decades ago, the U.S. Government affirmatively recognized this support for the Internet in “A Framework for Global Electronic Commerce.”  That statement recognized that “[m]any businesses and consumers are still wary of conducting extensive business over the Internet because of the lack of a predictable legal environment governing transactions.…” The same is absolutely true today.  Further, “[g]overnments can have a profound effect on the growth of commerce on the Internet. By their actions, they can facilitate electronic trade or inhibit it. Knowing when to act and — at least as important — when not to act, will be crucial to the development of electronic commerce.”  They went on to promote a set of principles and policies to set out a roadmap to facilitate growth of commerce on the Internet.  We need the same visionary support for blockchain today.

The Future of Voting Is Blockchain

by Chamber

The Future of Voting Is Blockchain

The Future of Voting Is Blockchain

By Perianne Boring

The U.S. has suffered its share of challenges when it comes to collecting and counting votes – from long lines at the polls, to ensuring citizens are registered (and motivated) to vote, to questions surrounding whether a chad was left “hanging” during the 2000 Presidential election, to a myriad of other concerns. No matter what side of the political aisle you fall, we can all agree that the process of casting a ballot could use some improvement.

Despite having evolved over time from the physical tokens used in ancient Athenian democracy to medieval little balls (“ballots”) to paper slips to mechanical voting machines to punch cards to optical scanners — the process of voting continues to be vexed with potential vulnerabilities and shortcomings.

Today, with the midterm elections upon us, the public is eagerly awaiting details on the progress made in the voting process. Could blockchain offer the solution?

How it Works: Blockchain Creates a Tamper-Free Electronic Record

One of the reasons that electoral officials have been slow to migrate voting online is fear that election integrity could be compromised by hackers. It seems the headlines are riddled with concerns regarding cybersecurity, so it’s no wonder. But that’s where blockchain comes in, which promises to combine much-needed ballot security with voting convenience.

Blockchain integrates cryptography into software in a unique way.  It creates a tamper-free record that can easily be checked to ensure votes are accurately recorded.

Due to the secure and immutable nature of blockchain, votes may be cast by computer or mobile device instead of having voters show up at a local polling place or cast a mail-in-ballot to be processed manually by election officials. Votes tracked through a blockchain provide for a quicker, tamper-proof way of counting votes, which could lead to greater voter participation, better ballot security, and at lower cost.

Blockchain’s Bolstered Security is Being Put to Practice Today

West Virginia, for example, is piloting a program to allow its military workers to vote remotely and securely via a blockchain-enabled platform from abroad. This November, all overseas workers from West Virginia will be offered the opportunity to vote via the blockchain network which will distribute and store the votes in 16 different locations – meaning hackers would need to hack into multiple locations in order to tamper with the results. In the nonpolitical voting zone, the Rock and Roll Hall of Fame used Chamber member Votem’s blockchain voting system to register 1.8 million votes. That 2017 Hall of Fame inductee process proved that blockchain voting could be effectively and efficiently used by millions, without fraud compromise or attacks.

Votem is introducing a token which will enable citizens to easily vote online, including from their mobile devices with an unprecedented level of verifiability, accessibility, security, and transparency.

Pete Martin, Votem Founder and CEO, sees the public’s leeriness of electronic voting and recent voting scandals as “both an opportunity and an issue.”

“It just requires more education on our part. People are fearful, and I get it. But we’re not going to shirk our responsibilities to make sure we can engender the trust with elections officials and people buying the system,” said Martin.

The implications for developing countries which do not yet have the voting infrastructure that the United States has are even more dramatic and could prove a powerful instrument for the continuing spread of representative democracy.

Voting should be as easy as hopping online from home to pay bills from your checking account. In today’s digital age, we can do better. By using blockchain to make voting more convenient and secure, we will encourage more people to vote.

Voting began, in ancient Athens, by the “casting” of clay or metal tokens.  Now, in the 21st century, we are observing the emergence of 21st century tokenization of voting: casting our ballots via blockchain technology.

Welcome to blockchain: the 21st century way of voting.

 

Supporting a Coordinated Approach Among Industry and Regulators Globally

by Chamber

Chamber Supports Coordinated Approach Among Industry and Regulators Globally

Chamber Supports Coordinated Approach Among Industry and Regulators Globally

Recently, almost a dozen global regulators came together to support regulatory harmonization across national borders. The creation of the Global Financial Innovation Network (GFIN) was designed to do just that, to: (i) establish a network of regulators; (ii) facilitate collaboration on policy work and regulatory trials; and (iii) support B2B and B2C cross-border trials. The creation of this new body with a global reach is an important signal that regulators worldwide are both understanding the significant potential of blockchain technology and actively establishing ways to support it. Challenges remain, however, in working out the details of such a collaboration.

The Chamber of Digital Commerce recently submitted comments to the GFIN’s Consultation Document, issued in August, to let the regulators know, in a unified voice, of the critical need for support as well as the regulatory lessons learned of the blockchain ecosystem.

After consultation with interested members, we stressed that adopting best regulatory practices in harmony will allow regulators around the world to better protect consumers without imposing excessive, onerous, gratuitous, or duplicative compliance requirements on the industry. Concepts such as regulatory sandboxes and harmonized policy objectives are exactly what this industry needs to rethink and revamp its oversight of growing technologies.

The Chamber supports the initiation of the GFIN as a mechanism for harmonization of best regulatory practices. Nevertheless, a problem noted in many digital environments is the concept of inconsistent and sometimes duplicative regulatory regimes across the globe. Ill-considered requirements will have the undesired consequence of crushing innovation and economic growth. Such a development would be inimical to national and global welfare and to the mission of the regulators themselves.
To this end, we cautioned that the GFIN should not serve as a mechanism to proliferate such regulations, which would neither serve the safety of consumers nor the growth of a new high-tech sector.

Among specific concerns the Chamber expressed in its comments are the large number of agencies in the United States engaged in the exercise of regulatory authority in addition to the GFIN’s primary U.S. counterpart, the Bureau of Consumer Financial Protection. We support the Bureau’s foresight and innovation in joining such a group. That said, other U.S. regulatory agencies – including the CFTC and SEC – are entirely autonomous from the Bureau. The GFIN must consider how it will cover U.S. businesses within its regulatory sandbox if its U.S. participants are subject to rules maintained outside its borders. Further, any new regulatory harmonization should simplify regulations, not create duplicate or overlapping regimes. These are challenges that are difficult to solve, but we are excited to work with the GFIN to find innovative ways to solve them.

Overall, the Chamber views the formation of the GFIN as an important signal that regulators worldwide are understanding the important potential of blockchain technology and are actively establishing ways to support it. We encourage thoughtful and meaningful steps such as these to help businesses gain a foothold, grow, and scale in this digital, global industry.

The Chamber is grateful to its members for providing their time and experience to develop this important proactive response. We look forward to providing significant ongoing support to the GFIN in making its recommended protocols optimally constructive, both in protecting consumers and fostering the development of the invaluable emerging technology of distributed ledgers and blockchain.

To review the Chamber’s comment letter to the GFIN, please click here.

Recommended Reading: Life After Google

by Chamber

Recommended Reading:
Life After Google

There have been many books written about the blockchain. The pace of publication is quickening as the technology matures. The Foundation of the Chamber of Digital Commerce shares some of the most interesting books and publications of interest to the blockchain and digital asset community. View recommendations here.

Life After Google: The Fall of Big Data and the Rise of the Blockchain Economy

by George Gilder

Published:  July 17, 2018

From Amazon.com:

“The Age of Google, built on big data and machine intelligence, has been an awesome era. But it’s coming to an end. In Life after Google, George Gilder—the peerless visionary of technology and culture—explains why Silicon Valley is suffering a nervous breakdown and what to expect as the post-Google age dawns.

Google’s astonishing ability to “search and sort” attracts the entire world to its search engine and countless other goodies—videos, maps, email, calendars….And everything it offers is free, or so it seems. Instead of paying directly, users submit to advertising. The system of “aggregate and advertise” works—for a while—if you control an empire of data centers, but a market without prices strangles entrepreneurship and turns the Internet into a wasteland of ads.

The crisis is not just economic. Even as advances in artificial intelligence induce delusions of omnipotence and transcendence, Silicon Valley has pretty much given up on security. The Internet firewalls supposedly protecting all those passwords and personal information have proved hopelessly permeable.

The crisis cannot be solved within the current computer and network architecture. The future lies with the “cryptocosm”—the new architecture of the blockchain and its derivatives. Enabling cryptocurrencies such as bitcoin and ether, NEO and Hashgraph, it will provide the Internet a secure global payments system, ending the aggregate-and-advertise Age of Google.

Silicon Valley, long dominated by a few giants, faces a “great unbundling,” which will disperse computer power and commerce and transform the economy and the Internet. Life after Google is almost here.”

“Google’s algorithms assume the world’s future is nothing more than the next moment in a random process. George Gilder shows how deep this assumption goes, what motivates people to make it, and why it’s wrong: the future depends on human action.” — Peter Thiel, founder of PayPal and Palantir Technologies and author of Zero to One: Notes on Startups, or How to Build the Future

“If you want to be clued in to the unfolding future, then you have come to the right place. For decades, George Gilder has been the undisputed oracle of technology’s future. Are giant companies like Google, Amazon, and Facebook the unstoppable monopolistic juggernauts that they seem, or are they dysfunctional giants about to be toppled by tech-savvy, entrepreneurial college dropouts?” — Nick Tredennick, Ph.D., Chief Scientist, QuickSilver Technology

Introducing: “Understanding Digital Tokens: Market Overviews & Guidelines for Policymakers & Practitioners.”

by Chamber

Introducing “Understanding Digital Tokens: Market Overviews and Proposed Guidelines for Policymakers and Practitioners”

Introducing: “Understanding Digital Tokens: Market Overviews & Guidelines for Policymakers & Practitioners.”
An Initial Step Toward Self-Regulation

By Perianne Boring and Amy Davine Kim

One of the most striking developments in the blockchain ecosystem is the emergence of token technology platforms, their transformative potential, and the multi-billion dollars in capital they generate.  This is just one unique facet among the many transformative and positive possibilities that blockchain technology represents for government, businesses, and consumers.  Blockchain technology will improve many aspects of our lives, much of which will be fueled through the distribution and use of digital tokens.

Yet, the versatility of tokens has proved a challenge for U.S. regulators. The sheer number of unique characteristics that tokens may represent means that much work remains to be done to understand their potential and functionality. A digital token can be a security, a currency, a commodity, property, or even a hybrid of these characteristics. Some have even suggested that a token may initially represent one functionality, such as a security, and then shift and represent another, such as a commodity. When it comes to the regulatory treatment of a token, this very versatility can be baffling at best.  The fact that other countries are recognizing the potential of this technology, and developing regulatory systems to welcome it, renders the problem more urgent.

Today, we’re pleased to announce that the Chamber of Digital Commerce’s Token Alliance is releasing the first installment of a comprehensive set of token and ICO guidelines in its report “Understanding Digital Tokens: Market Overviews & Guidelines for Policymakers & Practitioners.” Under the leadership of former SEC commissioner Paul Atkins and former CFTC Commissioner and Chair James Newsome, the project brings together 350+ industry technologists, economists, executives, lawyers and others worldwide within the Token Alliance. The project addresses some of the ideas that are quickly coming into focus for the blockchain industry — including the notion of self-governance for token sponsors and token trading platforms.

This report now equips our industry with the first set of proper tools to have meaningful, informed, and actionable dialogue to support a well-informed approach for this transformative industry.

Specifically, this installment of the project:

  • Provides guidelines for Token Sponsors and Token Trading Platforms for the generation and distribution of digital tokens to enable responsible governance and help to minimize fraud in the industry.
  • Contains overviews of the laws impacting digital tokens from five countries (with more to be added in later editions).
  • Provides a comprehensive market overview and trends analysis of the token economy.

We’re pleased to share with you today the most widely subscribed token governance project ever developed in the industry, designed to be the first in a series and a resource both for industry and governments.

Comments or Suggestions? 

Built on an open-source foundation, the Token Alliance guidelines are based on the current regulatory state of affairs and will likely evolve over time. This is just a first step – we anticipate additions to these guidelines to address other important aspects of the token economy.  All those dedicated to supporting and growing this thriving community, are invited to join the conversation and provide feedback to this white paper on GitHub.

Chamber Welcomes New Executive Committee Members

by Chamber

Chamber Welcomes New Executive Committee Members

Five leading financial services and blockchain technology innovation firms – BitPay,  Civic, DocuSign, Nexus and SALT – have joined the Chamber’s Executive Committee and play an integral role in helping to shape and drive the mission of the organization.

“These  innovative  companies are  reimagining financial  services and redefining  the way consumers and businesses  participate in the emerging blockchain-based  economy. We welcome their perspective and expertise  as we continue in our work to advocate for the power  and future of blockchain,” said Perianne Boring, founder and president, Chamber of Digital Commerce.

Read the press release

Protecting State Smart Contracts Innovation, One Signature at a Time

by Chamber

Protecting State Smart Contracts Innovation, One Signature at a Time

Smart contracts, virtual currencies, and their underlying blockchain technology are buzzwords crossing beyond an initial niche group of tech followers and into the mainstream. This exponential growth in awareness of these advancements is piquing the interest of state legislators seeking to bring the power of this technology, and its growing economy, to their states.  This includes an effort to confirm that so-called “smart contracts” are valid legal instruments under law. And for all of the benefits of smart contracts on a blockchain – transparency, efficiency, automation, and validation – why shouldn’t they?

There’s just one problem. When it comes to smart contracts, the rules to enable this technology are already in place under existing laws. Specifically, the federal Electronic Signatures in Global and National Commerce Act (ESIGN Act) and the Uniform Electronic Transactions Act (UETA) provide an unquestionable legal basis for smart contract technology executing the terms of a legal contract.

Several supportive and innovation-friendly legislators, recognizing the importance of this technology, have introduced new legislation to encourage its growth in their state. While we support their efforts to promote blockchain technology, we believe this action is unnecessary, could actually cause quite a bit of confusion, and, could potentially be preempted under the federal ESIGN Act. If passed, companies, individuals, and their lawyers would have to look at each state’s “smart contracts” legislation, and then compare it to ESIGN and the state’s UETA to ensure there are no gaps, conflicts, or preemption, and then ensure your particular form of “smart contract” is covered by the new law.

The Chamber of Digital Commerce released this Joint Statement in Response to Smart Contracts Legislation supported and signed by more than 450 companies and individuals explaining why new laws for smart contracts are unnecessary.

A smart contract is computer code that, upon the occurrence of a specified condition or conditions, is capable of running automatically according to pre-specified functions. The term “smart contract” is frequently misunderstood and used incorrectly, creating potentially harmful confusion when it comes to applying U.S. law.

Cryptographic signatures in used in smart contracts on blockchains fit within the “electronic signature” definition in existing law. Today, documents are legally effective if signed with the “invisible ink” of software. Electronic signatures are just as legally binding as handwritten ink signatures when establishing a contract.

As we’ve said before, “If it ain’t broke, don’t fix it.” Any state legislation seeking to define smart contracts through legislation, even if it’s in favor of the technology, risks redundancy, inconsistency across disparate state laws, and potential legal action over the question of preemption. Since existent laws already provide sufficient legal foundation for the enforcement of smart contracts, any additional state legislation will hinder innovation and create confusion across the industry. Let’s use this energy and enthusiasm to encourage growth of other innovative opportunities.

Special thanks to Chamber President’s Circle member Jeff Brown of Bonner & Partners for his support of our state smart contracts campaign in securing a number of signatures for our petition.

U.S. Crypto Tax Policy Isn’t Just Crazy, It’s Cruel

by Chamber

U.S. Crypto Tax Policy Isn’t Just Crazy, It’s Cruel

Author: Perianne Boring | Category: Commentary

Tags: rants, coindesk, tax policy

This opinion piece by Perianne Boring, founder and president of the Chamber of Digital Commerce, was originally published in CoinDesk’s “Crypto and Taxes 2018.”

“April is the cruelest month….”

So, begins T.S. Eliot’s masterpiece The Waste Land. While the poet wasn’t referring to the U.S. tax season, it fits. And there is something extraordinarily cruel, crazy even, in the IRS’s approach to the tax treatment of virtual currencies.

The blockchain has the power to promote the general welfare and secure the blessings of liberty to ourselves and our posterity. Those objectives just so happen to be two of the six purposes of the American government as laid out in the preamble to the Constitution.

So, it’s awkward that the IRS, an agency of the federal government, adopted an interpretation of the tax law that severely inhibits the achievement of these ends.

The problem? In 2014, the IRS determined that it would treat “convertible virtual currency,” such as bitcoin, as property. That decision subjects it to capital gain (or loss) and investment income tax treatment and associated reporting requirements.

What does this mean? Every time you pay your DISH Network bill, make an Overstock.compurchase, or book a hotel on Expedia using bitcoin, the IRS requires you to record the amount, allocate your cost basis in the satoshi (or ether, or what have you) to make the purchase, subtract the cost basis from the price, and report the difference to the IRS while calculating the capital (long or short term, depending on when you bought that one) gain or loss on your tax return.

And pay a tax, if it’s a gain.

That’s a prohibitive quagmire when selecting a payment method. It’s not just prohibitive. It’s crazy.

Incoherent policy

Stepping back, this is symptomatic of a broader problem with Washington’s disjointed approach to the technology.

As I recently wrote in The Hill (with a nod to Lewis Carroll):

“The breakthrough distributed ledger technology known as the blockchain is being given the ‘Mad Hatter’ treatment by the federal government.

The U.S. Commodity Futures Trading Commission is eyeing virtual currency as a commodity. The SEC is beginning to treat certain tokens as a security. The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has stated that certain activities involving convertible virtual currency constitute money transmission. The IRS treats convertible virtual currency as property.

Commodity? Security? Currency? Property?

Four different, inconsistent categories for the same thing.”

Both the IRS and FinCEN are agencies of the U.S. Treasury yet they have taken wildly differing approaches. Coherence lies in treating virtual currencies as an alternative to government-issued currency for tax purposes.

That’s our tax policy position, and it has the support of the blockchain sector. We developed it in consultation with some of the most respected economic policy experts in the world and after nine months of consultation with many of the more than 160 Chamber members.

Central banks around the world are exploring the concept of central bank-issued digital currency. How can something that is treated as a currency by a central bank be considered property?

 

Watchdog weighs in

Meanwhile, the IRS is on shaky ground. The Treasury’s own Inspector General issued a detailed report in 2016 criticizing the agency’s stand:

“It does not appear that any of the actions already taken by the IRS to address virtual currency tax noncompliance were coordinated to ensure that the IRS maintains a strategic approach to the tax implications of virtual currencies.”  

Further, the Inspector General observed:

“For example, if a taxpayer uses a portion of a bitcoin to buy a cup of coffee each day for one week, he or she will have to determine what portion of the bitcoin was used to make the purchase based on the daily exchange rate, convert it into U.S. dollars, and keep a record of each transaction so that the gain or loss from his or her virtual currency property can be properly reported. [The IRS’ property guidance] does not provide taxpayers with guidance on what records should be kept and how the records should be maintained. Due to the potential complexity of reporting otherwise simple retail purchase transactions related to virtual currencies, further guidance is needed to help taxpayers voluntarily comply with their tax obligations.”

Years later, the IRS has yet to provide such guidance.

To add insult to injury, the IRS issued a “‘John Doe’ summons” to popular exchange Coinbase for the records of half a million bitcoin owners, demanding access to enormous amounts of customer data.

The IRS’s demand provoked criticism from powerful Congressional officials, House Ways and Means Committee Chairman Kevin Brady and Senate Finance Committee Chairman Orrin Hatch. In the face of that and other criticism, the IRS drastically reduced the scope of its demand. Still, this kind of fishing expedition is onerous and scuttles the path to adoption of this technology.

Our policy team is active on Capitol Hill educating Members of Congress and staff on the imperative need for the federal government to have a coherent approach to the blockchain, not a patchwork of contradictory approaches.

The Congressional Joint Economic Committee recently devoted an entire chapter of its annual report to the blockchain, citing our work and recommending: “Regulators should continue to coordinate among each other to guarantee coherent policy frameworks, definitions, and jurisdiction.” Among the most important elements of such coordination is tax treatment.

April, the cruelest month? Quite possibly. Congress should treat virtual currency as an alternative to government-issued currency, giving consumers choice, and expressly exempt convertible virtual currency transactions from investment and capital gains treatment and associated reporting requirements.