Exploring Cryptocurrency Regulations, Taxation, and Use Cases
Cryptocurrency has become a major force in the financial market in recent years, and with its increasing popularity, governments and other organizations have been taking notice.[0] As investment in cryptocurrency has skyrocketed, so too have the regulations and enforcement actions taken against those who fail to comply with the law. This article will examine the nuts and bolts of cryptocurrency taxation, government regulations against cryptocurrencies, and the use cases of cryptocurrency.[0]
Cryptocurrency investment has increased due to the sudden rise of Bitcoin’s value, and its adoption by major players like PayPal and Xbox.[1] Bitcoin is the most valuable cryptocurrency, currently valued at billions of dollars. As a result, investments in venture capital and digital assets such as Bitcoin and Litecoin have been on the rise.
To understand cryptocurrency, it is important to understand the technology behind it. Blockchain is the technology behind most cryptocurrencies, non-fungible tokens, and other digital items. Blockchain is a digital ledger that records a list of transactions, including cryptocurrency transactions. It is managed by a global peer-to-peer network, which, in the case of Bitcoin, is millions of computers.[2]
The collapse of FTX, a highly regarded crypto exchange, illustrates the risks of cryptocurrency investment.[3] FTX went from being valued at $32 billion to filing for bankruptcy in just 10 days, due to a report by the crypto news website CoinDesk.[4] The report revealed that Alameda Research, an investment firm linked to FTX, held a position valued at $5 billion in FTT, the native token of FTX.[3] This prompted concern regarding FTX’s undisclosed leverage and solvency. FTX is now facing a class-action lawsuit, and celebrities that endorsed the platform, such as Larry David and Tom Brady, have been named in the suit.[4]
The SEC has been at the forefront of cryptocurrency enforcement actions and has issued 127 crypto-related enforcement actions since 2013.[5] Of those, 30 were issued in 2022 alone, and 57% included a fraud allegation.[5] Additionally, the SEC has brought first-of-their-kind charges related to insider trading and market manipulation.[6]
To buy and store cryptocurrency, you can transfer it between your own wallets, buy it with fiat currency, or create your own offer. Purchasing cryptocurrency through online platforms, known as Crypto Exchanges, is done via a medium known as a Crypto Wallet, which stores and manages the currency.
0. “United States Hardware Wallet Markets, Competition, Forecast …” www.businesswire.com, 31 Jan. 2023, https://www.businesswire.com/news/home/20230123005559/en/United-States-Hardware-Wallet-Markets-Competition-Forecast-Opportunities-2022-2028-Increasing-Investments-in-Cryptocurrency-Based-Devices-and-Increasing-Use-of-NFC—ResearchAndMarkets.com
1. “Cryptocurrency Market Size Worth USD 1902.5 Million by 2028” www.globenewswire.com, 31 Jan. 2023, https://www.globenewswire.com/news-release/2023/01/18/2590725/0/en/Cryptocurrency-Market-Size-Worth-USD-1902-5-Million-by-2028-Report-by-Fortune-Business-Insights.html
2. “Cryptocurrency mining, which relies on abundant power, expanding …” nonpareilonline.com, 31 Jan. 2023, https://nonpareilonline.com/business/cryptocurrency-mining-which-relies-on-abundant-power-expanding-in-iowa/article_17151507-5a07-5398-a13d-971d92691f5b.html
3. “Cryptocurrency Has Promise But ‘Screams for Regulation,’ Says …” broadbandbreakfast.com, 31 Jan. 2023, https://broadbandbreakfast.com/2023/01/cryptocurrency-has-promise-but-screams-for-regulation-says-miami-mayor-francis-suarez/
4. “What Is FTX Cryptocurrency and What Went Wrong? | Morgan …” www.forthepeople.com, 31 Jan. 2023, https://www.forthepeople.com/blog/what-ftx-cryptocurrency-and-what-went-wrong/
5. “SEC ramped up cryptocurrency enforcement in 2022, report shows …” www.pionline.com, 31 Jan. 2023, https://www.pionline.com/cryptocurrency/sec-ramped-cryptocurrency-enforcement-2022-report-shows
6. “Cornerstone Research: SEC Tightens Cryptocurrency Enforcement” www.prweb.com, 31 Jan. 2023, https://www.prweb.com/releases/cornerstone_research_sec_tightens_cryptocurrency_enforcement/prweb19120222.htm
