With Bitcoin becoming a hot button issue over the last few months, the IRS was recently awarded some good news. Cryptocurrency exchange platform Coinbase was ordered to turn over the data for all US consumers who purchased Bitcoin and other currencies between 2013 and 2015. The belief is that many of these people did not pay any tax on potential earnings. This would make them subject to potential auditing, as a Judge in California has ruled. Information for more than 14,000 people was handed over from Coinbase to the IRS. Bitcoin is the main form of cryptocurrency, a digital asset that is openly bought, sold, and held online with an ever-changing dollar value.
Without any government regulation, many cryptocurrencies have become incredibly volatile. Unlike the stock market, with set hours on business days, Bitcoin sees real-time peaks and valleys. The value of Bitcoin has gone up over 2,000% over the last year, peaking at over $20,000 USD. Coinbase, the gold standard of cryptocurrency platforms, not only charges a small premium for buying and selling, but also allows users to trade lesser known cyrpto currencies (such as ETH, LTC, and recently BCH). This volatility lead many people doubling, tripling, and quadrupling their investments, literally overnight, opening the door for the IRS to inquire about Coinbase’s users. While not allowed to necessarily get involved in BTC itself, the recent ruling confirmed that the IRS could get involved with Coinbase as they are a US-based business.
Bitcoin and cryptocurrency are often looked at as “the stock market on steroids”. While many on Wall Street are concerned about volatility and long-term sustainability, early adopters have already profited handsomely. The number of US consumers who actually reported earnings on Bitcoin between 2013 and 2015 is reportedly under 1,000, meaning a large majority of people profited, but reported nothing. The IRS involvement may be the first step towards a bursting the “bubble” of BTC and other cryptocurrencies. A counter-point to that is that Bitcoin is not a bubble at all, but rather the pin.