A new definition of crypto comes from the IRS — Law Decoded, 17-24. October

by Arthur · October 25, 2022

No matter how much attention the United States Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission receives in the crypto industry, for individual traders and investors, it often comes down to the position of the Internal Revenue Service (IRS) – and how much tax one owes.

Last week, the IRS last week released a bill with a well-defined digital assets section outlining whether and how taxpayers will account for the use of cryptocurrencies, stablecoins and non-fungible tokens (NFTs).

Page 16 of the draft defines digital assets as any digital representation of value recorded on a “cryptographically secured distributed ledger or similar technology.” The 2021 tax form required taxpayers to indicate whether they had received, sold or exchanged “virtual currency” — with that term changed in the yet-to-be-issued 1040 tax form for 2022.

Taxpayers are required to answer the digital assets section of their tax return if they have made transactions with digital assets during the tax year. A number of situations will require US taxpayers to indicate yes to the digital assets question of Form 1040 or 1040-SR. This includes receiving as a reward, price or payment for property or services or sold, exchanged, gifted or disposed of a digital asset in 2022.

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New amendment provides regulation for crypto activities in the UK

An amendment to the Financial Services and Markets Bill now before the UK Parliament could extend the law’s powers to regulate financial promotion and other activities of crypto-assets. According to the rationale that accompanied the amendment, the new bill would “clarify that powers related to financial promotion and regulated activities can be relied upon to regulate cryptoassets and activities related to cryptoassets.” In a letter dated August 9, the Financial Conduct Authority stated that it will publish final rules for the promotion of cryptoassets once the Treasury formalizes legislation to bring these into its remit.

Hong Kong reportedly wants to legalize crypto trading

Hong Kong is taking steps to reclaim its status as a global cryptocurrency hub by launching several legal initiatives related to the crypto industry. The Hong Kong government is considering introducing a separate bill to regulate crypto in its own China-free way, according to Elizabeth Wong, head of the fintech unit at the Securities and Futures Commission (SFC). One of the SFC’s initiatives is to allow retail investors to “directly invest in virtual assets”, which would mark a significant shift from the SFC’s stance over the past four years.

Ripple continues to gain points in the case against the SEC

Ripple appears to be nearing victory in its ongoing battle with the SEC. The company’s general counsel, Stuart Alderoty, confirmed on Twitter that the firm finally has a set of elusive documents after “18 months and 6 court orders,” but noted that they remain confidential at the SEC’s insistence. “It was well worth the fight to get them,” he said, adding, “I’ve always felt good about our legal arguments, and I feel even better now. I’ve always felt bad about the SEC’s tactics, and I I feel even worse about them now.”

The disputed documents relate to a 2018 speech by former SEC Division Director William Hinman regarding the status of Ether (ETH), in which the FSA apparently backed out to keep the documents under wraps.