- At the World Economic Forum in Switzerland, the forming of a global consortium for crypto governance signals a major step forward for digital assets.
- Cambodia revealed its plans for a national blockchain-based cryptocurrency.
- The IRS is cracking down on crypto traders who avoid reporting digital assets.
While blockchain and digital assets have been hot topics in tech and finance circles for nearly a decade now, most governments have been slow to recognize cryptocurrency as a valid fiat alternative and issue regulations that would help the industry thrive. The forming of the Global Consortium for Digital Currency Governance, announced last week at the annual World Economic Forum in Switzerland, is a major step in the right direction. As the first group of its kind tasked with overseeing the governance of digital currency worldwide, the announcement marks “a massive step towards financial inclusion” for cryptocurrency.
The Consortium is comprised of financial institutions, technical experts, and many other global companies. As Bank of England Governor Mark Carney put it, “Governance is the core pillar of any form of digital currency… It is critical that any framework on digital currencies ensures security, efficiency and legitimacy of payments while ensuring fair and open competition.”
This decision to include major enterprises, banks, governments and regulators into one massive consortium to drag digital currencies into the mainstream with a regulatory framework that works for all could represent the true birth of the industry.
Since Bitcoin was invested, cryptocurrency has been operating on the fringes while the mainstream has shown interest. Now, this consortium could allow for other big enterprises — of the likes of Facebook with Libra — to launch other similar projects.
More so, with this growing expansion and interest in cryptocurrency, the technology revolution could well be on its way and a new form of digital payment coming to the fore.
As cryptocurrency acceptance and awareness grows throughout the world, a number of countries have launched or planned to launch their own nationally used digital currency. The latest region to join this growing list is Cambodia, whose central bank is developing a “national payment gateway” in the form of a blockchain-based peer-to-peer platform.
Informally called “Project Bakong” and backed by the National Bank of Cambodia, the country’s central bank digital currency (CBDC) is due out sometime this fiscal quarter, though an exact date wasn’t given. According to Coindesk, Project Bakong will “work on a closed system supported by its banking members,” such as the Phnom Penh Commercial Bank. PPCBank President Shin Chang Moo said the digital currency is “in the final stages of the deployment,” and is expected to be cheaper and more convenient than traditional methods of payment and money transfers.
Users will be able to set up a Bakong wallet that will be automatically linked to their bank accounts, allowing easy fiat currency exchange into the new CBDC in real time. NBC says it will store all transaction data from the platform, suggesting payments may be fully traceable.
Users will be able to use the “quasi-form” CBDC for everyday payments from their mobile devices. The initiative is expected to support the government’s push to introduce QR-based transactions throughout the country.
Although Chang Moo said there is a “zero possibility of speculation,” it isn’t clear if the new CBDC will be backed by, or pegged to, the local currency or the U.S. dollar, which is the country’s unofficial second currency.
One of the challenges that comes with the growing acceptance of cryptocurrency is how to report any digital earnings to the IRS. Of course, that doesn’t mean you should just avoid doing so altogether, as the Internal Revenue Service is making clear. As reported to Forbes, millions of transactions may be going unreported in the United States, which could carry heavy financial penalties and even criminal charges.
Though crypto is a relatively new form of currency, the IRS took some unambiguous steps in 2019 to ensure that token holders understand their legal responsibilities when it comes to reporting earnings. Over 10,000 letters were sent to crypto-holding taxpayers in 2019, making it hard for recipients to claim ignorance of tax laws. Newer tax forms also specifically ask about whether any digital assets were purchased, sold, or traded.
Even with the IRS’s recent guidance, significant questions remain. The recent guidance and FAQs do not address specifically how to compute value, how to determine basis, or how estate tax rules apply to cryptocurrency. Besides, IRS FAQs are not technically legal authority. Even so, the new guidance does include Revenue Ruling 2019–24, in addition to the increased FAQs. This revenue ruling addresses common questions regarding the tax treatment of a cryptocurrency hard fork and air drops. If you are not compliant with the IRS, in some cases, normal amended returns or quiet disclosures may be fine. In other cases, formal voluntary disclosures to the IRS may be appropriate. There can be no mistaking the IRS’s intent to make big enforcement and revenue drives, and it is likely that there are going to be some big, public and messy examples of IRS enforcement efforts.
That’s the roundup for February 1, 2020. Check in next week for the latest news of cryptocurrency innovation and regulation around the world!
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