Buyer Beware on Bitcoin and Other Cryptocurrency
by John W. Schuster of Caliber Law, s.c.
Virtual currencies have become extremely popular recently, with their promises of huge profit swings and the benefit supposedly being anonymous spending and trading. However, a couple of things that all people should be aware of before they decide to invest in virtual currency:
Its Property, Not Currency. While they call these investments “cryptocurrency” and “virtual currency,” the IRS has specifically classified cryptocurrency as being property/an investment, as it is speculative and is not actual legal tender. That means you will have to pay capital gains on your cryptocurrency if you sell it for a profit, and if you do not hold it as an investment for over a year, can be subject to full capital gains treatment.
Trading and Spending Virtual Currencies is Not Untraceable or Anonymous. This statement is simply not true. In fact, the IRS has successfully been able to subpoena companies that help you buy and invest in cryptocurrency, meaning that all of your ownership of and transactions regarding virtual currency are fully traceable, both by governments and by cyber investigators. The IRS is fully on to cryptocurrency, and you can bet there is going to be an extremely large upswing in enforcement now that this type of investment has gained such popularity.
Virtual currency takes place in an unregulated market. Unlike normal investments, cryptocurrency is completely unregistered, so you have no idea what is really affecting the ups and downs of the virtual currency market, and it can be easily manipulated by its creators. In addition, there is no insurance at all if someone were to virtually steal your virtual currency, as it is unregulated, unprotected, and most importantly, uninsured by its exchanges.
Please be careful when deciding to buy cryptocurrency or enter into the virtual currency trading markets, as it is what you don’t know about something that can kill a deal and make it a much less attractive option.
Atty. John W. Schuster, J.D., MBA is the owner and an attorney at Caliber Law, S.C., a law firm located in Oshkosh which specializes in business law and real estate. Schuster helps business owners start, protect, buy, sell and grow their businesses.