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The IRS has Words for Crypto Investors… Again: Tax Warnings

The cryptocurrency industry may still be going strong, but that doesn’t mean it hasn’t had its share of problems. Nor does it mean everyone is a fan of virtual currencies. The IRS certainly isn’t, and crypto investors have learned that the hard way the past two months.

Here’s what we know.

IRS has Words for Crypto Investors

At the start of last month, the IRS began mailing more than 10,000 crypto investors informing (well, it was more of a warning) that they may owe taxes on various cryptocurrency transactions.

This week, word has come out that crypto investors are receiving further letters from the IRS; these letters are warning them that their federal taxes do not match the information brought forward by cryptocurrency exchanges. One upside is that the IRS recognizes that it’s the crypto exchanges that may have made errors, not the taxpayers.

Still, these letters, which crypto investors have been receiving the past few weeks, is yet another indication that the government is focusing on crypto tax compliance, and that they maintain their belief that cryptocurrencies are a “significant threat” to tax collection, as described by the IRS’s top criminal chief.

Interestingly, you can see the letters on the IRS’s website. They state the following: “We received information from a third party (such as employers or financial institutions) that doesn’t match the information you reported on your tax return.” The letters add: “this discrepancy may cause an increase or decrease in your tax, or may not change it at all.”

>> Binance Expected to Resume US Operations in the Next 2 Months

What This All Means

Most people know cryptocurrencies have their share of problems and illegal activity. They are volatile, but they can also bring great fortune to those who invest correctly. Same goes for penny stocks. But when things like this happen, one has to question the legality of virtual currencies. Now, however, I suppose we will see further action being taken in terms of legality, with the IRS announcing they will soon declare criminal tax evasion cases.

Do you have any thoughts on the IRS sending letters to crypto investors? Let us know your thoughts in the comments below.

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BitFury

Crypto Mining Group BitFury to Investigate Data Analysis with AI

The cryptocurrency mining and chip development firm BitFury has announced plans to set up a new department that will investigate the benefits of ‘big data’ analysis using artificial intelligence (AI). Speaking to newswire Reuters this past Tuesday, BitFury CEO Valery Vavilov referred to big data as ‘the next oil’, highlighting the need for a much greater focus on constructive analysis. According to Vavilov, the information available in 98 percent of big data is not being properly utilized, something his company hopes to simplify through AI-powered analysis.

“..artificial intelligence will bring new and extraordinary benefits to nearly every facet of our lives. To help this incredible technology achieve maximum impact, Bitfury is expanding our mission to offer hardware and software solutions designed especially for AI applications,” said Vavilov in a statement announcing the new development.

BitFury, which is headquartered in Amsterdam and has offices in London and San Francisco, represents one of the largest competitors to market-leader Bitmain, the Chinese company that currently dominates the world of cryptocurrency mining and chip production. In 2016, BitFury made headlines when it established a deal with the government of Georgia to develop a blockchain-based system of land registration, later opening a large cryptocurrency mining center in the country.

AI and Blockchain: A Marriage of Convenience

Now, the ever-innovative BitFury continues its expansion beyond blockchain with a foray into AI-enhanced data analysis. Artificial intelligence and blockchain are no strangers to each other, having been party to several crossover projects recently involving big data. The autonomous, trustless nature of blockchain technology lends itself to automated AI processes such as machine learning, and the decentralized model fits perfectly into the needs of big data analysis.

Earlier this year, Coinpayments CEO Alex Alexandrov announced the launch of a new AI-enhanced blockchain system called VELAS, or Virtual Expanding Learning Autonomous System. Utilizing an evolved form of AI known as artificial intuition, the VELAS team aims to develop a blockchain that self-regulates in an effort to address concerns regarding energy efficiency, security, and scalability.

>> Altcoins Almost Wiped Out as Crypto Market Cap Drops $30 Billion

“Here at Velas, our purpose is to address and fix existing issues and challenges faced by most existing Blockchains, such as centralization for example, or 51% attack, nothing at stake problem, scalability, security, high upfront expenses and so on. This is done by using neural networks optimized by artificial intelligence to enhance its consensus algorithm,” explained Alexandrov.

Blockchain projects—Bitcoin in particular—are increasingly drawing criticism for their excessive use of energy, prompting several mining outfits like BitFury to move operations to low-cost, clean energy countries like Paraguay. In February this year, BitFury announced a partnership with South Korean research and development firm Commons Foundation for the launch of two hydroelectric powered Bitcoin mining centers at Itaipu and Yacyreta.

Disclaimer: I currently hold a small amount of Bitcoin, XRP, and ETH. I am associated with none of the companies mentioned.

This article was curated through CryptoCurrencyNews’ Contributor Program. If you would like to write for us, send us your submission!

Featured image: DepositPhotos © urban_light

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crypto payroll

New Zealand Tax Authorities Give the Go Ahead for Crypto Payroll

The crypto train has not yet stopped chugging along. More and more companies and countries are looking to get involved in the crypto sector, despite the hardships it has faced the past year. New Zealand just so happens to be the latest country, with reports coming out on Tuesday that said the sovereign island country will allow employers to pay their workers in cryptocurrency.

Here’s everything we know.

New Zealand Allows Employers to Pay Staff in Cryptocurrency

This month, New Zealand tax authorities published a ruling that featured a section giving guidance for companies that want to compensate their staff in cryptocurrency. Blockchain News reported this yesterday, August 13.

The guidance given by tax authorities included how to calculate PAYE taxes when paying in cryptocurrency, as well as highlighting that companies can use foreign exchanges when facilitating crypto payments.

“If the appropriate valuation cannot be obtained from a New Zealand-based exchange, an overseas-based exchange can be used,” the ruling said. “For some ‘altcoins’ (crypto-assets other than bitcoin) it may be necessary to convert into U.S. dollars or another fiat currency, and then convert into NZD.”

This is, of course, significant news as several countries remain anti-cryptocurrency. And New Zealand recognizes this, with the ruling calling New Zealand’s decision to allow crypto payroll “quite progressive.”

>> Ripple (XRP) Gains Regulatory Clarity in the UK: What’s Next?

Not the Only Ones

Despite the significance, and despite the countries that continue to have a hard stance on virtual currencies, New Zealand is not the only country to consider crypto payroll. As various reports noted, last year, CEO of Uphold Robin O’Connell discussed the opportunities using currencies like Bitcoin in payroll will bring.

“With money, people always want the same three things: faster, easier and more transparent,” O’Connell explained. “We think with Bitwage and Dash, we can continue to open that up for a lot more people all over the world.”

Takeaway

What do you think about New Zealand’s decision to allow crypto payroll? Let us know in the comments below.

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cryptocurrency

China to Release Its Own Cryptocurrency Soon

Cryptocurrency may have been completely unknown for most people around half a decade ago, and most of the banks in the world did not even take it seriously. However, things have changed dramatically over the past few years, and many banks are now considering the possibility of launching their own digital currencies.

Facebook (NASDAQ:FB) announced its own cryptocurrency last month, while American banking giant J. P. Morgan (NYSE:JPM) has come up with its own as well, and in a new development, it has emerged that the Chinese central bank is close to releasing its own. According to the report, a senior representative of the People’s Bank of China (PBOC) has stated that the bank is now close to launching its own digital currency.

Key Details

The deputy director of the payments department at the PBOC, Mu Changchun, stated that the cryptocurrency that the department has been working on is now almost ready. It is a significant development and one that could have far-reaching consequences for the crypto sphere at large. It is believed that the PBOC’s researchers have been hard at work with regards to the digital currency for around half a decade. The central theme of the research was to come up with a currency that could be used as a substitute for cash. In this regard, it is interesting to note that there are other central banks that are exploring similar possibilities.

>> Ethereum Underperforms Against Bitcoin: What Next for Altcoins?

Reports suggest that the issuing authority in the case of these digital tokens is going to lie with both the PBOC as well as the various commercial banks in the country. That being said, the PBOC has been a bit vague regarding the technology that is being used to produce the cryptocurrency. The central bank stated that it is not going to be solely dependent on blockchain technology in order to produce the coin. In fact, it is open to the idea of exploring the usage of other technologies.

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cryptocurrency

Crypto Criminals Take in $4.3 Billion in 2019, CipherTrace Reports

Cryptocurrency criminals have taken in an estimated $4.3 billion USD in 2019, according to CipherTrace.

CipherTrace, a cryptosecurity company based in Silicon Valley, has released its Q2 2019 Cryptocurrency Anti-Money Laundering (AML) Report, which is a detailed overview of major cryptocurrency thefts, scams, and fraud around the world. The firm’s Q1 report estimated that cybercriminals illicitly obtained more than $1.2 billion USD in cryptocurrency during the first three months of the year alone. To put the severity of these figure in context, last year’s total figure for crypto theft was $1.1 billion USD.

“These thefts only represent the losses that are visible. CipherTrace estimates the true number of crypto asset losses was much higher,” the company’s report notes. Included in the total figure is $850 million USD that iFinex—the company that operates the Bitfinex exchange and the stablecoin Tether—allegedly defrauded from its customers by handing over the funds to a Panama-based “bank” called Crypto Capital.

Exit Scams

One of the most worrying threats to investors in cryptocurrency is the prevalence of “exit scams,” whereby scammers launch a new cryptocurrency based on a promising concept, then they raise the money from investors through an Initial Coin Offering (ICO) before mysteriously disappearing with investors’ funds. One of the most well-known involves QuadrigaCX, the cryptocurrency exchange in Canada that saw its founderthe only person with access to customer fundsmysteriously pass away in India, leaving investors unable to access their invested funds.

Pyramid Schemes

The world of cryptocurrency is also rife with pyramid schemes, with CipherTrace reporting that the biggest single loss of 2019 was the PlusToken scheme, which claimed to have developed a high-tech trading bot that yields 10% interest per month for investors. According to CipherTrace’s report, the PlusToken platform reportedly recruited over 100,000 users and raised over $189 million through membership fees between May 2018 and March 2019. The amount of money held by PlusToken is rumored to be over $2.9 billion.

>> Coinbase UK Drops Support for Zcash: Why? We Don’t Know!

How are the Authorities Responding?

Due to the intangible nature of cryptocurrency, cyber frauds are incredibly difficult for authorities to crack down on. However, in one significant example, the Financial Action Task Force (FATF) announced a new “travel rule”—which the G20 gave its full support for in June—that requires transactions between exchanges to include personal information about the sender and receiver of funds, much like international bank transfers.

Cryptocurrency regulation has now become a priority, particularly given Facebook’s announcement that it will launch its own currency Libra, and with political figures becoming increasingly concerned with blockchain’s potential for global financial disruption.

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