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11
Connecticut CPA
g
January/February 2018
Many powerful figures in banking and
finance have taken negative positions
on bitcoin due to its unregulated na-
ture. Indeed, many legal and economic
analyses draw attention to its risky
features as a speculative instrument as
well as the technical issues possible
due to an increase in transaction vol-
umes and the blockchain size itself.
Recently, we have seen some intense
volatility as governments modify their
regulations to deal with the new tech-
nology. China recently banned resi-
dents from trading in cryptocurren-
cies on exchanges and also prohibited
raising capital in exchange for coins or
tokens in initial coin offerings (ICOs), a
form of crowd funding.
We see similar volatility across cryp-
tocurrencies when we hear comments
from notables such as JPMorgan
Chase CEO Jamie Dimon, who re-
cently stated that bitcoin was a "fraud."
This criticism saw bitcoin value plum-
met only to recover more strongly
than ever before.
The following week, on the heels of a
recovery movement, Dimon tempered
his stated position by saying that the
foundation of bitcoin the blockchain
is valid and that he "doesn't want to
speak of it anymore" in regard to bit-
coin itself. JPMorgan Chase and many
other large financial service firms are
actually investing significant amounts
of money in blockchain technologies,
most likely because they want to re-
main part of the "middleman" equation
in transactional banking.
Successful Use Cases
The major consensus from industry
titans is that blockchain is here to stay
and, as it evolves and new platforms
are created to leverage the concept,
there will be impressive technological
advances.
Consequently, there is a race to cre-
ate compelling platforms and services
around the technology. Cook County
in Illinois, for example, has completed
blockchain testing in a number of areas
including legal filings, deeds, property
title transfers, and even voting, and has
written some informative reports on its
findings. These outcomes validate that
blockchain is proving transformative to
a number of ledger-based records.
Tax Considerations
Tax implications are also a real con-
cern for most cryptocurrency holders
and, consequently, their tax prepar-
ers. If you perform tax services, you
will want to ensure that you're up to
speed on the 2014 IRS virtual currency
reporting guidance (Notice 2014-21)
u
If you perform tax services,
you will want to ensure that
you're up to speed on the 2014
IRS virtual currency reporting
guidance (Notice 2014-21) and
start probing your clients who
hold cryptocurrencies to ensure
they are also aware of the
reporting implications.
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