Commentary
U.S. financial authorities regard cryptocurrencies as a capital flight threat to the weakening greenback—unlike dollar-denominated stocks and bonds.
Today, 16 million Americans have obtained online crypto tokens—a wildly popular capital flight escape hatch from the incredible shrinking dollar.
That so many investors are converting their weak dollars into cryptocurrencies is a major worry for the U.S. Treasury Department—especially now that inflation has gained a solid foothold. New statistics point to the formation of a 1970s-type wage-price spiral—a screaming red flag that chairman Jerome Powell’s Federal Reserve has lost control of U.S. price stability.
It’s no small wonder that cryptocurrency technology has captivated the investing public. It permits person-to-person financial transactions that are private and secure. Crypto transactions are unlike all other assets in that they are made completely independent of politically controlled entities such as banks and brokers. Even more important, cryptocurrency transactions happen out of sight of the IRS and the Federal Reserve Board.
An Amazing Fortune Has Plowed Into Crypto
Since 2009, an estimated $2 trillion has flowed into this field from investors seeking financial privacy and rising purchasing power. The Pew Research Center says that as recently as 2015 only 1 percent of U.S. investors held cryptocurrencies. Crypto.com estimates that today, 220 million investors hold cryptocurrency on a global scale.Crypto as an investment is a pretty exciting ride. Bitcoin, for example, rose from $1,000 in early 2017 to $69,044 in October 2021. Since that period, Bitcoin has experienced 50 percent downdrafts and currently trades at $41,333.
The Wild West Meets Regulatory Vaudeville
Cryptocurrencies remain the investment equivalent of a Wild West show. What I mean by that is federal regulatory officials still have not fully defined whether crypto is a commodity, a security, or a form of currency.The “problem” with privately controlled crypto currencies insofar as central bankers are concerned is that individuals enjoy far more autonomy and financial privacy than via the government fiat money system, which is now pumping out weaker and weaker greenbacks.
Uncle Sam Moves to Neuter Dollar-Shaming Cryptocurrencies
To sum up, there’s understandably a lot of excitement and interest in cryptocurrencies, which makes it all the more important to force yourself to not overlook the mundane—such as new IRS “sand traps” set up for cryptocurrency holders who profit from, but don’t always report, their gains.Below are widely ignored federal initiatives led by the Treasury Department and IRS to ensnare successful cryptocurrency traders and passive holders alike:
- A mandatory new crypto “gotcha” question that first appeared on 2020 tax returns that asks, “At any time during 2020, did you sell, receive, send, exchange or otherwise acquire any financial interest in any virtual currency?” It is a mandatory YES or NO checkbox.
- The IRS is putting cryptocurrency traders on alert that by not disclosing their transactions, they are at risk of cheating on their taxes. The YES or NO mandatory box check makes prosecution of cyber scofflaws much easier. Going forward, tax evasion defendants will have a much harder time claiming ignorance as a mitigating factor in crypto-gains reporting.
- Bureaucrat-friendly establishment media suggest that the IRS plans to focus on popular services such as Coinbase, a leading cryptocurrency exchange, that serves an estimated 3.1 million active users. (Coinbase’s CEO recently ruffled Black Lives Matter by declining to involve the company in politics, making Coinbase a probable future target of leftists, deep state actors, and their “mainstream media” allies.)
- IRS guidance protocols classify cryptocurrencies as a taxable asset, not a currency. So, if you make a trade between cryptocurrencies and it results in a profit, the IRS holds that it is a taxable event.
- Among the IRS’s major enforcement initiatives is Operation Hidden Treasure, and pay close attention to the mission statement of the office of IRS fraud counsel, which takes direct aim at cryptocurrency: “These transactions are not anonymous … we see you.”
- IRS Director of Fraud Enforcement Damon Rowe told a virtual audience at the Federal Bar Association recently that cryptocurrency “fraud” will be a major enforcement priority. He said that Operation Hidden Treasure is part of a joint enforcement task force including the IRS’s civil office of fraud enforcement and its criminal investigation units. Armies of new agents and tech specialists from Silicon Valley will focus on analyzing blockchains to root out “tax evasion” by cryptocurrency holders.
Globalist Banking Interests Line Up Against Private Cryptocurrencies
IRS employees are reportedly training alongside European Union financial police bureaucrats to coordinate the assault against what they see as the cryptocurrency threat.The agency regards cashing out cryptos to make everyday purchases as a taxable event. The IRS vows to scrutinize purchases using crypto “cash outs” as a starting point for beating blockchain security.
Warn Your Friends—Crypto Currency Gains Are Taxable
Many libertarian friends see crypto money as tax-free gains—destined to happen beyond the control of governments and central banks. But just as Uncle Sam broke Swiss banks as a global privacy haven, this war against private cryptocurrency is a threat that cannot be dismissed. So be sure to report your crypto gains correctly going forward.Ultimately, Bitcoin and other private crypto currencies are likely to be neutered or annexed by regulatory authorities in the event of a crash involving large scale losses. (When the bubble popped on banks back in 2008, regulators used the mayhem to transform big banks into enforcement vassals of the state. I see a similar regulatory neutering of private cryptocurrency if there is a crash.)
My hope is that cryptocurrency will somehow become too popular to destroy or co-opt. But right now, sadly, that is speculative thinking—at best.
