Investors Face Hefty Taxes on Cryptocurrency Purchases 4 810

Lately, it feels like there’s never any good news to come out of the crypto community. And the rollercoaster ride for so many US investors is about to take another dramatic drop. The latest monkey wrench in the works comes in the shape of the taxman, with the IRS enforcing taxes on cryptocurrency purchases.

The Internal Revenue Service announced that all goods bought using Bitcoin, or any other digital currency, would be taxed as capital gains. What does this mean for crypto owners? That if they bought or sold anything that might have capital gains using cryptocurrency, they will have to report them to the IRS.

But What About the Volatility?

Once again, the pesky little issue of price volatility raises its ugly head. How, for example, is it possible to calculate taxes owed on a past purchase, when Bitcoin value went from less than a dollar in 2010 to just shy of $20,000 at the end of last year, and back down to around $8,000, at latest check?

The taxman is not taking these fluctuations into account. And unwitting investors are exposed to tax bills that their digital stashes can no longer cover.

Taxes on Cryptocurrency Purchases

Earlier this week, a Reddit user posted an entry entitled “I just discovered that I owe the IRS $50k that I don’t have, because I traded in cryptos. Am I fu**ed?” Which sparked a flurry of nerves and backlash within the crypto community.

The contributor reported a tax liability of $50,000 on some trades he had carried out with $120,000 of Bitcoin — which now has a value hovering around $30,000. “I feel like I might have accidentally ruined my life because I didn’t know about the taxes,” he lamented.

Not Operating Outside the Tax Authorities

Many cryptocurrency investors believe that the system operates without government and financial institution oversight. This, up until now at least, may be true. However, US tax authorities still regard cryptocurrency as a property and not a currency. This means that many investors may face hefty taxes on cryptocurrency purchases and exchanges. And some other nasty surprises, as well.

To be fair, it’s currently a little confusing, seeing as crypto-brokers don’t legally have to issue 1099 disclosure forms on digital currencies. These are the forms used to report any income other than wages or bonuses.

But there’s a caveat. Individuals are still responsible for reporting any and all gains to the IRS. And in the cryptocurrency community, individuals are responsible for their own worth.

Court Intervention

Last November, Bitcoin trading platform Coinbase, was ordered to turn over information on all accounts worth $20,000 or more, during 2013 to 2015. The ruling was concluded by a US district court judge in California.

This case came about after the IRS found that only around 800 taxpayers had claimed gains made with Bitcoin during that time. The Coinbase agreement only affects some 10,000 accounts, though, and does not extend to the original 480,000 accounts first requested by the IRS.

The lesson? Not reporting gains to the IRS is tax evasion. And tax evasion isn’t good.

It Gets Worse

The ruling of capital gains is not the only complication when it comes to cryptocurrency investors and the IRS. It’s a lot more complicated than that. Say an investor sells some cryptocurrency after a year of holding it. The profits would be considered long-term capital gains. Moreover, losses are not deductible against any future tax years to come.

The problem is that many accountants don’t understand, or aren’t willing, to get to grips with taxes on cryptocurrency purchases.

Investors are unaware that there are so many ways in which the IRS can come back to bite them. A simple transaction, such as using Bitcoin to buy Ethereum or Litecoin, for example, is taxable.

Moreover, when you use your cryptocurrency to buy something, it’s not only sales tax that you’re liable for. You’re purchasing a property that is denominated in dollars and if you then exchange that, there is a tax liability. So, be sure to keep it in mind before you forget to declare your earnings.

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Christina is a technology and business communicator who has worked with high profile ICOs and blockchain influencers to break industry news.

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Freelance Terrorist Carried Out Hundreds of Bomb Threats in Exchange For Bitcoin 45 7071

An American-Israeli teen is sentenced to a decade in prison after a Tel Aviv court convicted him for a series of fake bomb threats he carried out in exchange for Bitcoin.

The 19 year old began making threats professionally at the age of 16. He is convicted only for crimes committed while over the age of 18. These include making false threats and reports, extortion, money laundering, and conspiracy to commit a crime.

While the Israeli courts withheld the defendant’s identity because some of his alleged crimes occurred while he was a minor, the Guardian identified him as Michael Kadar at the time of his arrest. He was originally indicted for over 2,000 bomb threats, carried out between 2015 and 2017.

Kadar Targeted Children and Jewish Community Centers

The targets of Kadar’s threats included Jewish community centers, the Israeli Embassy in Washington DC, elementary schools, shopping centers, hospitals, law enforcement agencies, airports and airlines.

A threat to an El-Al flight resulted in the deployment of fighter jets for an escorted emergency landing; another threat to a Canadian airport left six people injured during emergency disembarkment; a Virgin flight dumped eight tons of fuel before landing because of a threat; and another threat went to a plane carrying the Boston Celtics.

Kadar also targeted Republican Delaware state senator Ernesto Lopez, who he threatened with blackmail and the murder of his daughter. After Lopez ignored the demands, Kadar ordered drugs to have sent to Lopez’s residence.

Dealing Terror From Mom and Dad’s Apartment

His reign of terror operated from his parent’s fifth floor apartment near the beach in a posh neighborhood in Ashkelon, about 30 miles south of Tel Aviv. But his threats landed in over a dozen countries, including Ireland, New Zealand, Germany, Denmark, Great Britain, Belgium, Australia, Norway, Argentina, Israel, the United States, and Canada.

“One can easily imagine the terror, the fear and the horror that gripped the airplane passengers who were forced to make an emergency landing, some of whom were injured while evacuating the plane,” read the verdict by judge Zvi Gurfinkel, “and the terrified panic caused when there was a need to evacuate pupils from schools because of fake bomb threats.”

The Judge also divulged Kadar’s fees for his services: $40 for a threatening phone call to a private residence, $80 for a bomb threat to a school, and $500 for an airplane scare. Kadar operated on the dark net and disguised his IP address, using a powerful self-installed antenna to tap into remote networks, and software to mask his voice. According to an indictment filed against him in Florida, he spent some of his calls going into graphic detail threatening the deaths of children in American Jewish centers.

A Small Fortune in Bitcoins

At the time of his arrest, Kadar had amassed around 184 Bitcoins for such services—about half a million dollars at the time, and closer to $680,000 today. He also dealt in bomb making manuals, drugs, and child pornography.

Kadar is the son of an American mother, and his father is an Israeli engineer, and has dual citizenship. The US Department of Justice has also indicted Kadar for 32 crimes, including hate crimes, cyberstalking, giving false information to the police, and making threatening phone calls to around 200 institutions. A separate indictment also accuses Kadar of threatening the children of a former CIA and Pentagon official with kidnapping and murder, and links him to over 245 threatening calls.

When Kadar was arrested, he tried to escape by grabbing a pistol from a police officer, but was wrestled to the ground. Thursday’s conviction follows a cooperative investigation by the FBI and Israeli authorities, who have not been able to recover Kadar’s Bitcoins.

Teen’s Mother Calls Conviction ‘Cruel’

Kadar’s mother spoke outside the courtroom after her son’s sentencing, saying “This is the most cruel, cruel thing in the world. I’m very sorry, but I am ashamed that the country acts this way.” She insisted that her son needed treatment, not prison.

In an earlier interview she told Israeli TV her sun was suffering from a brain tumor, which made school difficult for him. Because of this and his autism, Kadar was homeschooled.

Defense lawyer Shira Nir said these conditions made Kadar unfit to stand trial, as he could not distinguish right from wrong. A medical panel confirmed the defendant’s autistic condition, but concluded he was capable of understanding the consequences of his actions. Judge Gurfinkel said Kadar’s conditions were taken into account, lessening the sentence from 17 years in prison to 10.

Bitcoin Uses As Much Energy As Austria, Could Add 2°C to Earth’s Atmosphere 2,187 14286

Bitcoin mining, it turns out, damages the earth more than more traditional environmental assaults like actual mineral mining.

According to a paper published Monday in Nature Sustainability, the power-hungry Bitcoin mining process consumes more than triple the amount of energy needed to mine the equivalent amount of gold, more than quadruple what’s needed for copper, and more than double what it takes to mine platinum.

Other coins didn’t fare much better. By their measurements, Ethereum and Litecoin consume 7 megajoules of electricity to produce the equivalent of $1, the same energy expenditure as copper mining but more than that of platinum or gold. Monero eats up 14 megajoules to produce $1.

Naturally, these measurements refer to the notoriously variable dollar valuations of such tokens. “While the market prices of the coins are quite volatile,” write researchers Max J. Krause and Thabet Tolaymat, “the network hashrates for three of the four cryptocurrencies have trended consistently upward, suggesting that energy requirements will continue to increase.”

Bitcoin’s Growing Electricity Bill is Bigger Than Some Countries

We’ve long known that Bitcoin is unsustainable. In a 2015 article for Motherboard, Christopher Malmo pointed out that a single Bitcoin transaction used 5,033 times as much energy as a Visa swipe, and could power 1.5 American homes for a day.

The electricity used to crunch Bitcoin code—and its environmental cost—has been growing with its increasing popularity. Digiconomist’s Bitcoin Energy Consumption Index shows Bitcoin currently consuming 73.12 terawatt hours (or 263.232 billion megajoules) of electricity annually. To put that in context, it’s comparable to the amount of energy it takes to power Austria for a year.

That means there are 175ish countries on earth using less energy than Bitcoin (to say nothing of crypto on the whole), while 66 countries consume less energy per capita than one Bitcoin transaction (it takes 94 thousand kilowatt hours of electricity to mine a single Bitcoin).

Iceland, a major hub of Bitcoin mining farms, spends nearly as much energy on Bitcoin as it does powering its residential homes. In this case, the damage is mitigated because most of Iceland’s power comes from renewable energy.

Canada’s Bitcoin emissions are also on the lower end due to renewable energy sources. They’re using this to court mining companies from China, where mining emissions are about four times that of Canada’s. Montreal International attracts foreign investment by calling Quebec the land of “green bitcoin”. This has caught the eye of some Chinese mining companies looking to go overseas as the Chinese government has discouraged expansion and shut down some mining operations altogether.

Depending on Bitcoin’s growth, some have projected that it could use as much energy as the entire world by 2020.

Digital Currency Has a Real Carbon Footprint

Krause’s and Tolaymat’s research reminds us of the sobering reality that all this invisible wealth has real world costs.

For the 30 months they measured between January 2016 and June 2018, they estimate their four featured tokens collectively belched out at least 3 million tons of CO2 emissions, possibly as much as 15 million tons.

These findings follow another study, published last month, which determined Bitcoin alone could add two degrees Celcius to global warming within the next three decades. That’s enough to raise ocean acidity by 29 percent.

Solving Bitcoin’s Energy Consumption Crisis

So what is the solution? If the world were to switch to 100 percent renewable energy overnight, the problem would be moot. But we can’t hold our breath for that. There could be ways of incentivizing clean energy so greener mines reap more coins, or of implementing clean energy in other ways.

It’s also possible to adopt less computationally intensive mining algorithms so the mining computers don’t guzzle as much juice. This would disappoint a lot of old school Bitcoiners who have invested in hardware, but their feelings don’t really outweigh that 2 degrees celcius that everyone will have to live with (or die by).

Whatever the best solution turns out to be, something needs to change soon. Bitcoin is growing up, and it’s time for it to mature into something more sustainable.

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