Hello as always, and welcome to this week's edition of Overbit Insights.
With the US extended tax deadline fast approaching on May 17th, it seems that the IRS and cryptocurrency stories are once again making headlines.
According to reports, The United States' tax agency, the Internal Revenue Service, is prioritising an effort to enforce reporting on crypto trades to find people who have neglected to inform their windfalls.
The Wall Street Journal reports federal judges have approved two IRS summons to the payments company Circle and the crypto exchange Kraken to turn over records of any customer who had over $20,000 in transactions since 2016.
The idea is to close the loop of inadequate reporting in the crypto space and bring it closer to the exact requirements as stock trades. The IRS has reportedly found one investor who failed to report $5.6 million in crypto transactions/gains. Of course, failure to pay taxes on crypto gains could result in substantial penalties and possible jail time.
If you've sold crypto in under a year, you'll be facing short-term capital gains, which are taxed at the same rates as your wages—thinking of hiding your gains in an international account? The IRS, reports the Journal, says it intends to compare data it receives from Kraken with other data it has on hand from another source regarding offshore crypto transactions.
Suffice to say; taxes are certainly one area in crypto where the government will have a strong force.
To wrap up this week's edition of Overbit Insights, we move over to the corporate world, where yet another big name in the Bitcoin world has cooled off on its enthusiasm.
Square, one of the world's largest payment processors, company behind CashApp, and led by Twitter CEO Jack Dorsey, has recently come out and said they don't have plans to purchase more Bitcoin in the near future.
In an interview, the company's CFO also referred to the carbon footprint of the Bitcoin network and how it is a real issue that needs to be tackled in the future. Square's CFO Amrita Ahuja made the declarations in an interview with Financial News.
Ahuja stated: "We don't have any plans at this point to make further purchases. There are no plans at this point to re-evaluate where we are from a treasury standpoint." The company, which was one of the first ones to jump into the Bitcoin bandwagon, is holding 5% of its cash holdings in Bitcoin.
Square, led by Bitcoin enthusiast Dorsey, bought $50 million worth of Bitcoin last October and doubled down on its bet this February, spending $170 million in Bitcoin this time.
Square accounted for a Bitcoin impairment loss of $20 million on its Bitcoin investment during its last earnings calls during the first quarter of 2021.
At the end of the day, large corporations are traditionally risk-averse, making Square's non-commitment to investing more into Bitcoin reasonable. However, with Elon Musk and Tesla coming out just days beforehand, "cold feet" in the corporate world might undoubtedly be a trend to watch in short to mid-term.
Thanks again for reading the weekly edition of Overbit Insights. Catch you next time.