Jason Schwartz
December 23, 2022

The rules have caused a lot of consternation within the industry. On their face, they appear to require reporting not just by centralized exchanges, but also by miners, stakers and software developers, none of whom would have the information required to be reported.

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October 03, 2022

Consensus-layer stakers (like the plaintiffs in this case) run software that help maintain a blockchain in exchange for block rewards paid out by the blockchain protocol in its native token. Many crypto users stake from home, and many more stake through delegates like centralized exchanges or through decentralized protocols. Staking has become even more relevant to the crypto industry since Ethereum, by far the most widely used smart contracts platform, switched its consensus mechanism to…

August 16, 2022

Congress passed reporting requirements for digital assets that will take effect in 2024 for 2023 taxes. Until that time, centralized digital asset exchanges generally are not required to file for digital assets 1099s, although some already do. The IRS previously has issued John Doe summons to obtain information from Coinbase, Circle, and Kraken to compel the production of taxpayer information. (For a general discussion of the taxation of digital assets, see our article "Squaring the Circle:…

August 08, 2022

Tornado Cash is a decentralized technology protocol. All of its code is open-source and will exist as smart contracts on the Ethereum blockchain for as long as the Ethereum blockchain exists. Neither the United States, nor any other jurisdiction can halt the operation of those smart contracts or seize assets from them. Instead, the only legal effects of sanctioning Tornado Cash seem to be that (i) U.S.-based servers cannot point to it and (ii) it is illegal for U.S. persons to interact with…

June 07, 2022

This appears to be the first use of a service token by a U.S. court, and raises fascinating questions about the extent to which a web3 wallet can be used as a proxy for the person or persons who know its private key. Incidentally, it also hammers home one of the first things you learn when you get into crypto: never interact with a token or link you don’t recognize.

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May 06, 2022

The Bitcoin blockchain does not support smart contracts, so Bitcoin mixers necessarily involve custodians, which are susceptible to sanctions. By contrast, Ethereum and other smart contract platform mixers typically are open-source protocols. It will be interesting to see how governments try to address noncustodial, readily replicable mixer protocols while weighing concerns about terrorism and tax evasion against their citizens' desire for financial privacy.

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April 28, 2022

Superintendent Harris is absolutely right to recognize the importance of chain analysis to the future regulation of crypto transactions. That said, decentralized finance is just that: decentralized. The liquidity for smart contract token swaps and yield-generating protocols comes from a swarm of anonymous depositors located all over the globe. If U.S. regulators prohibit U.S. intermediaries from interacting with a smart contract because its back-end liquidity cannot be adequately traced, U.S…

March 23, 2022

Some crypto investors seem not to realize that converting one crypto token into another token or into fiat is treated as a taxable exchange that triggers gain or loss recognition. For example, I have seen several "flippers" caught off-guard when they realize that their swap of an appreciated fungible token or NFT into $ETH or another crypto token is a taxable event. That said, the guidance around many crypto transactions remains woefully inadequate, and what guidance exists is often very…