Cryptocurrency advocates have long maintained that the primary benefit of “cryptos” is that they are not centrally controlled, actually residing on cell phones. Transfers from one holder to another do not go through a “central bank,” such as the Fed, but from one phone to another. This was supposed to be beyond the reach of the government. No longer.
According to the Wall Street Journal, in March 2018 Coinbase, a cryptocurrency exchange domiciled in San Francisco, CA, provided data – under a federal court order – on about 13,000 accounts to the IRS. The exchange turned over data on customers who bought sold, sent or received digital currency worth $20,000 or more between 2013 and 2015. The data included the customers’ names, taxpayer ID numbers, birth dates and addresses, plus account statements and the names of counterparties.
Three versions of letters were supposedly sent to the persons whose data was obtained from Coinbase. The sternest asked recipients to sign a statement declaring, under penalty of perjury, that they are in compliance with tax laws.
Insomuch as there is no explicit requirement that cryptocurrency sales be reported to the IRS, this will put recipients of this letter in a difficult position.
Crypto advocates further assert that there are limits on the number of “coins” that can be issued, unlike the dollar, which the Fed can now create in unlimited quantities. However, what they fail to mention is that there are no limits on the number of cryptos that can be launched. Bitcoin, which was the first, is the best known.