After a year-long fight with the IRS on turning over customer data, Coinbase both won and lost. It won in that the court significantly narrowed the type of information that it was ordered to turn over to the IRS. It lost in that it was still required to turn over data on approximately 13,000 customers. For the 13,000 customers this means that the IRS may now be contacting you to let you know that you may owe additional tax. Continue Reading
On March 1, Steptoe is hosting a workshop in New York on the tax consequences of investing in cryptocurrency, as well as common methods of tax structuring for individuals and entities using, trading, and investing in cryptocurrency and tokens. The workshop will feature discussions on a range of topics from determining basis, income, and capital gains to common on-shore and off-shore tax structuring mechanisms.
In addition to hearing from Steptoe’s cryptocurrency tax specialists, you will hear from outside panelists, including:
- Brian Kelly, Founder and CEO, BKCM LLC
- James Morgan, General Counsel & Chief Compliance Officer at Genesis Global Trading
- Houman B. Shadab, Professor of Law and Co-Director of the Center for Business and Financial Law, New York Law School
You can learn more and sign up for the workshop here.
The Federal Communications Commission (FCC or Commission) last week added itself to the list of regulators that have issued guidance or raised warnings about crytpocurrency when it sent a notification about interference with wireless broadband signals from a Bitcoin mining device.
The FCC is the independent agency that regulates communications in the United States, and it has responsibility for regulating spectrum and radio waves in the United States to ensure, among other things, that licensed users of spectrum do not suffer from interference. While seemingly a remote concern from Bitcoin, the mission of the FCC collided with a miner in New York City. Continue Reading
Government regulators are increasingly focused on blockchain and cryptocurrency activity, a development that some, such as IMF head Christine Lagarde have called inevitable. In the US, the Financial Crimes Enforcement Network (FinCEN), the Commodity Futures Trading Commission (CFTC), and the Securities and Exchange Commission (SEC) have issued statements, enforcement actions, and penalties involving blockchain and cryptocurrency activities, and they are not the only agencies monitoring these activities. As a result, it is important for industry participants to be prepared to respond to potential regulatory inquiries.
This is why Steptoe has partnered with Thomson Reuters to publish a “one-stop” guide to the regulatory landscape and best practices for responding to blockchain and cryptocurrency-related investigations. Continue Reading
You know that federal entities like the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Financial Crimes Enforcement Network (FinCEN), and the Internal Revenue Service (IRS) have all issued guidance concerning cryptocurrencies. But get ready to add a new agency to the list—the Department of Defense’s Defense Security Service (DSS).
Standard Form 86 (SF-86), “Questionnaire for National Security Positions,” is the lengthy form that anyone applying for a security clearance from the US government must complete. Question 20A of the SF-86 asks whether the applicant or immediate family members have ever “had any foreign financial interests (such as stocks, property, investments, bank accounts, ownership of corporate entities, corporate interests or businesses) in which you or they have direct control or direct ownership? (Exclude financial interests in companies or diversified mutual funds that are publicly traded on a U.S. exchange.)”
We know that FinCEN considers cryptocurrency to be currency, the CFTC considers it a commodity, and the IRS considers it to be property, but is it also a “foreign financial interest” for the purposes of the SF-86? Continue Reading
Today, Steptoe & Johnson LLP’s Blockchain and Digital Currency practice applauded the Commodity Futures Trading Commission’s (CFTC) decision to propose, through the rulemaking process, an interpretation defining the term “actual delivery” in the context of retail commodity transactions involving cryptocurrencies like Bitcoin.
“We are pleased that the commission has chosen to respond to Steptoe’s petition for rulemaking, along with other requests for guidance, by proceeding in this manner,” said Micah Green, chair of Steptoe’s Financial Services practice and co-head of Steptoe’s Government Affairs and Public Policy Group. “We look forward to reviewing the proposal and working together with the industry to find the right approach for businesses that handle, trade, and exchange cryptocurrency.”
In July of 2016, Steptoe filed its petition requesting that the CFTC proceed with a rulemaking on this subject rather than continued enforcement actions, so that there would be visibility to the industry and an opportunity for the industry to comment and participate in the process. Specifically, the petition called for a commission rulemaking to set forth the requirements for effectuating a transfer of ownership under the Commodity Exchange Act (CEA). Under the CEA, retail commodity transactions within the terms and intent of such provision are required to be traded on a commission-regulated exchange, unless the transaction falls within one of the stated exceptions, such as a transaction that results in “actual delivery” of a commodity within 28 days. Accordingly, the petition also requested that a CFTC rulemaking outline the elements necessary to satisfy the requirements of “actual delivery” under the CEA as applied to leveraged or financed retail cryptocurrency transactions.
“Cryptocurrency and crypto-assets represent a new asset class, and we applaud the CFTC and other regulatory agencies who have chosen to evaluate their approach to innovation and investor protection to make sure it fits with this new type of asset,” said Jason Weinstein, co-chair of Steptoe’s Blockchain and Digital Currency practice.
Steptoe is among the leaders in the evolving legal and regulatory landscape surrounding blockchain technology and digital currency. The firm’s multidisciplinary, global practice features experience in a range of disciplines that will be impacted by blockchain technology in the coming years – including corporate and fund formation, financial services, international regulation and compliance, trade, IP, government contracts, public policy, tax, cyber, and government investigations and enforcement. Steptoe helped create and serves as counsel to the Blockchain Alliance and the Digital Assets Tax Policy Coalition. The firm also serves as the legal services partner of the Global Blockchain Business Council, and as an advisor to industry-leading advocacy groups Coin Center and the Chamber of Digital Commerce. The firm’s Blockchain and Digital Currency practice has advised venture capital firms, financial institutions, established companies, startups, and governments on issues surrounding digital currencies and blockchain technology.
Alan Cohn was recently featured on the Future Tech Podcast. In an interview with Richard Jacobs, Editor of Crypto News Insider and Organizer & Host of the Bitcoin, Ethereum, and Blockchain Super Conference 2018, Alan discusses the recent regulatory changes and guidance related to cryptocurrency such as the recent Securities and Exchange Commission (SEC) Investigative Report on the Distributed Autonomous Organization and Investor Bulletins along with the need for clearer tax treatment of cryptocurrencies. Listen to the podcast here.
This summer, US and international regulators have brought enforcement actions, issued guidance and explanatory documents, and sharpened previously-taken positions regarding regulation of cryptocurrency and crypto-tokens under the anti-money laundering, derivatives, securities, and tax laws. These actions provide a better sense of the way in which US regulators will approach the blockchain and digital asset space going forward, but also leave many unanswered questions.
These recent actions indicate increased regulatory risk for certain types of activities. Companies that have made or are contemplating making initial coin offerings or cryptocurrency investments should assess these activities in light of these new regulatory pronouncements. But overall, this latest round of regulatory actions may provide greater regulatory certainty and a better understanding of regulatory priorities, which in turn can provide innovators and early adopters a clearer legal framework within which to operate.
Steptoe’s advisory covers four areas of recent regulation and guidance:
- Anti-Money Laundering
- Commodities and Derivatives Regulation
- Securities and Initial Coin Offerings
Read the full advisory here.
Before 2014, the treatment of virtual currency for tax purposes was somewhat of an open question. That is, would it be treated like a currency? Maybe a foreign currency? Or would it be treated like property? Or maybe a commodity or a derivative? The IRS took initial steps to answering that question in Notice 2014-21, where the IRS asserted that virtual currency would be treated like property.
A lot of practitioners thought that this was probably the right answer, as did many significant investors, but for ordinary folks who have been using bitcoin or other virtual currency to buy goods and services, it may have been a bit surprising. Essentially, the IRS characterization means that if you go to Starbucks and use bitcoin to buy your coffee, while it may seem to you the same as using dollars, for tax purposes, it’s more like using gold. And if your gold has appreciated in value since you acquired it, you may owe tax on the gain. Same thing with virtual currency. The problem arises because using virtual currencies to buy things seems much more like using cash than like using gold, so many virtual currency users may not have even considered that there could be potential tax consequences. Continue Reading
The Street quoted Alan Cohn in an article on August 20 titled “How Federal Regulators Are Playing Catch-Up With Bitcoin Craze.” The article looks at the most recent enforcement actions and regulatory guidance from the Securities and Exchange Commission (SEC), the Financial Crimes Enforcement Network (FinCEN), the Internal Revenue Service (IRS), and the Commodity Futures Trading Commission (CFTC). Mr. Cohn opined about the significance of the recent regulation: “What you’re seeing now is the next round of regulatory guidance, and in a sense, starting to fill in some of the gray areas and the gaps that have emerged given the pace of development in this area […] You’re seeing an advance in the regulatory framework evolving around this new asset class.”
Read the full article here.