More and more federal and state agencies are weighing in on virtual currency. Here's what they are saying:
Financial Crimes Enforcement Network (FinCEN):
More and more federal and state agencies are weighing in on virtual currency. Here's what they are saying:
Financial Crimes Enforcement Network (FinCEN):
Tuesday, April 22, 2014
12:00 pm PT
3:00 pm ET
RSVP by April 21
Please register for this complimentary presentation to receive log-in/dial-in information.
The IRS has issued its first major ruling on the U.S.
federal tax implications of transactions in, or transactions that use, Bitcoin
and other convertible virtual currencies.
The ruling stresses that it relates to convertible virtual currencies. The legal landscape
with respect to Bitcoin and other convertible virtual currency continues to
evolve at a more rapid pace. Last March, FinCEN issued its now famous virtual
currency guidance. Shortly thereafter, a number of high profile enforcements
ensued. If history is any lesson, it is
likely that following this ruling will likely will be followed by some tax
enforcements. Therefore, miners, exchanges, businesses transacting in Bitcoin and
others dealing with virtual currencies should promptly assess this guidance and
ensure compliance.The IRS made clear that penalties apply for failure to timely comply. This should be of particular concern to the extent the ruling is applied retroactively.
We have prepared a complete client alert on this recent IRS ruling. Please click here to access.
Among other things the IRS has stated:
One of the most significant pronouncements of the notice is that the IRS has determined that virtual currency is treated as property for U.S. federal tax purposes and therefore general tax principles that apply to property transactions apply to transactions using virtual currency. The notice indicates that this means that:
Additional points made by the IRS include the following:
Payments in virtual currency received for services performed as an independent contractor constitute gross income, if related to any trade or business carried on by the individual as other than an employee, at the fair market value (in U.S. dollars) as of the date of receipt and constitutes self-employment income and is subject to the self-employment tax.
The fair market value of virtual currency paid as wages is subject to federal income tax withholding, Federal Insurance Contributions Act (FICA) tax, and Federal Unemployment Tax Act (FUTA) tax and must be reported on Form W-2, Wage and Tax Statement.
Payments made using virtual currency is subject to information reporting to the same extent as any other payment made in property (e.g., payments in virtual currency with a value of $600 or more for fixed and determinable income including rent, salaries, wages, premiums, annuities, and compensation).
Third party settlement organizations are required to report payments made to a merchant on a Form 1099-K, Payment Card and Third Party Network Transactions, if, for the calendar year, both (1) the number of transactions settled for the merchant exceeds 200, and (2) the gross amount of payments made to the merchant exceeds $20,000.
Taxpayers may be subject to penalties for failure to comply with tax laws (e.g., underpayments attributable to virtual currency transactions such as accuracy-related penalties under section 6662, and failure to timely or correctly report virtual currency transactions when required to do so under section 6721 and 6722). However, penalty relief may be available to taxpayers and persons required to file an information return who are able to establish that the underpayment or failure to properly file information returns is due to reasonable cause.
If you have any questions, Pillsbury has one of the leading virtual currency practices in the country. Our team of over 70 professionals includes a number of tax specialists. For more information, please contact Jim Gatto, our team leader, or the attorney with whom you regularly interact at Pillsbury. Mr. Gatto can be reached at email@example.com or 703-770-7754.
After taking Inside Bitcoins to Las Vegas this past winter, this definitive Bitcoin event is returning to New York City, April 7-8 at the Javits Convention Center. Join us in New York City as our industry experts, business visionaries, and virtual currency veterans converge to analyze the first digital, decentralized, peer-to-peer based global currency. These thought leaders will also share their insights and knowledge on the implications of bitcoin, along with predictions on what lies ahead. Whether you're a venture capitalist, lawyer, technologist, entrepreneur, regulator, cryptographer, payment pioneer, or public policy expert, our agenda offers the latest intelligence for everyone and anyone interested in learning more about bitcoin. Can bitcoin carve out a significant place for itself alongside today's mainstream payment technologies? What technical and regulatory obstacles does bitcoin need to overcome? Will large-scale bitcoin mining help to push the price of bitcoins higher? Is bitcoin going to save the global economy, or is it today's answer to 17th-century tulip mania? Be sure to attend Inside Bitcoins and get answers to all of your burning questions!
Originally seen in MoneyBeat - a Wall Street Journal blog.
One thing we can tell you about the Mt. Gox bankruptcy case: It won't be like any other bankruptcy case you've seen.
MoneyBeat had a very enlightening and interesting talk with Christopher Mirick, a partner at the international law firm Pillsbury Winthrop Shaw Pittman, operating in the firm's Insolvency & Restructuring practice. He is also one of two educational directors at American Bankruptcy Institute's international committee and co-author of the book "Strategies for Creditors in Bankruptcy Proceedings."
One point he made, that seems obvious in retrospect, is that there's never quite been a bankruptcy case like this one. It involves a new technology, a company that seemed to operate with only a few employees and almost no presence in the countries across the globe where it did business, and questions of cross-border bankruptcy law.
What follows is a
paraphrased version of our conversation.
How messy is this bankruptcy going to be?
It's going to be "very
messy," Mr. Mirick said. There are a couple of things to think about. For
one thing, Mt. Gox has creditors all over the world. Of their roughly 130,000
creditors, only about 1,000 are in Japan. According to Mt. Gox, they don't have
U.S. bank accounts. "So what's a person in Illinois going to get? There's
nothing there," Mr. Mirick said. Mt. Gox did business in a
lot of places where it didn't have any physical existence. "What's there to
Is your firm involved in the case?
Mr. Mirick said
this kind of case would be "up our alley," but the firm isn't currently
involved, although it does have a Tokyo office. "But we would jump at the
"You've never had a
case like this." It involves a cutting-edge technology, and questions about
cross-border enforcement of bankruptcy proceedings. Mr. Mirick pointed
to Lehman Brothers, for comparison [a case that, we'd note is still being settled.] Unlike Mt. Gox, Lehman had entities
in each jurisdiction where they operated. "This [Mt. Gox] is just like a couple
of guys with some computers who happened to be in Japan, and handling half a
billion dollars that went missing."
What can a creditor hope to recover?
Mr. Mirick said creditors of Mt. Gox should be looking for a way to track the money and bring it back, if possible. They should also examine the timeline, for when the money first disappeared, he said. Was it three months ago? Six? "If they were making payments during that time, maybe you could claw some of that back."
From the creditors' point of view, Mr. Mirick said, somebody has to be blamed, whether it's the Mark Karpeles, the directors, or the officers. That person or people may have insurance, if not assets, and creditors may be able to go after that, he added.
"But, for a company without physical assets, the ability to get a recovery is quite limited."
Many of us have been focused on cyber-security, especially in the wake of the recent data breaches over the holidays, among other things. Two Maryland Law Enforcement Officers are leveraging the power of social media and the Internet to enable you to "Secure What's Yours." In 2013, acting on their vision, they introduced an innovative approach to reuniting owners with their tangible personal property that was stolen or is missing, e.g., iPhones, Androids, laptops, iPads, TVs, etc., working with law enforcement officers across the nation.
My Property Locker's database allows its users to register valuables that are serialized or contain identifiable marks, enabling them to add pictures of the items along with a copy of their purchase receipts. Its Apple and Android apps also allow users to scan product UPC codes as part of the registration process. If an item is stolen or comes up missing, the owner can report the loss to My Property Locker -- according to My Property Locker, in 2011, there were an estimated 9,063,173 property crimes offenses across the nation, totaling an estimated $15.6 billion in losses. Law enforcement officers across the U.S. are able to register with credential verification and to use the Police Advanced Search function to identify the owners of stolen or missing items. Law enforcement officers and the property owners are then able to work together to reunite the owner with their stolen or lost property. And, My Property Locker is free to consumers.
My Property Locker reports that it has been endorsed by the Maryland Crime Prevention Association and the Virginia Crime Prevention Association. Additional information about My Property Locker is expected to be available on Officer.com.
Additional Sources: YouTube, My Property Locker Tutorial - How to add/remove property; Facebook, My Property Locker; iTunes App Store; Google play Android App
Photo: Courtesy of My Property Locker, All Rights Reserved
Both the Central Bank of Russia and the Russian Prosecutor General's Office explained that the rouble is the country's sole official currency and that the production of alternative monetary products, such as Bitcoin and other virtual currencies, is illegal under current law. Russian regulators also warned that anyone who exchanges virtual currency for national or foreign currency, goods, or services will be treated as if they are potentially involved in suspicious activities, money laundering, or terrorism financing.
The United States Attorney's Office for the Southern District of New York announced the forfeiture of approximately 29,655 Bitcoins in connection with the seizure of the Silk Road website. The Silk Road operated as a marketplace for illicit goods and services before it was shutdown in October 2013. At the time the U.S. Attorney's Office seized the Silk Road website and its servers, a large number of Bitcoins was found in a digital wallet stored on the website's servers. Since the seizure, no claims have been filed for the wallet, and on January 16, 2014, United States District Judge J. Paul Oetken held that the wallet was deemed forfeited to the U.S. Government.
A spokesman for the U.S. Attorney's Office stated that it has not yet been determined how the Bitcoins will be liquidated. Since the seizure of the Bitcoins, the value of the virtual currency has grown with the market's increasing demand. At the present exchange rate, the Bitcoins are valued at approximately $28 million, approximately 4x their value at the time of the seizure.
Another set of Bitcoin-related arrests for failing to comply with the Bank Secrecy Act. http://www.cnbc.com/id/101366511
Interestingly, investors in one of the companies include the Winkelvoss twins. Anyone who is involved in Bitcoin or other virtual currency endeavors needs to ensure that they understand and comply with the law. This includes getting licensed when necessary and complying with all disclosure obligations. While there are many legal, sound investment opportunities in this space. Investors should be particularly careful in conducting legal diligence in these companies before investing.
On January 28th and 29th, the New York Department of Financial Services (DFS) will hold hearings to discuss the regulation of virtual currencies, including the potential issuance of a "BitLicense" specific to virtual currencies. The DFS previously expressed concern about virtual currencies remaining a "virtual Wild West for narcotraffickers and other criminals...." Despite this concern, the DFS, like FinCEN, has indicated a willingness to work with the virtual currency industry and other stakeholders to establish "appropriate regulatory guardrails to protect consumers and our national security." The DFS "is concerned that - at a minimum - virtual currency exchangers may be engaged in money transmission as defined in New York law, which is an activity that is licensed and regulated by DFS." Thus, even though the DFS has stated that it has not made a determination at this point about the necessary regulatory guidelines for virtual currencies, one might anticipate that, at a minimum, these guidelines will include additional oversight and licensure "to bring virtual currencies out of the darkness and into the light of day."
The upcoming hearings will be held in New York City and will include some high-profile players in virtual currency, such as Cameron and Tyler Winklevoss, Principals of Winklevoss Capital Management, Barry Silbert, Founder & CEO of SecondMarket and Founder of the Bitcoin Investment Trust, Fred Ehrsam, Co-Founder of Coinbase, and Cyrus R. Vance, Jr., District Attorney of New York County.
On January 16, 2014, The Sacramento Bee in its article Kings will be first pro sports franchise to accept online currency Bitcoins announced that by March 1, 2014, Sacramento Kings fans "will be able to purchase team merchandise and tickets using Bitcoins through BitPay." Bitcoin is a virtual currency which can be transferred through various exchanges. In the article, Vivek Ranadive, the Kings managing partner and founder of the Silicon Valley tech firm Tibco Software Inc., confirms that "he wants the team to be among the most technologically-advanced franchises in the world. He calls his philosophy 'NBA 3.0.'" Among other technological advancements the Kings plan are a technology-rich proposed new arena and "a new Kings app for smartphones that allows fans to upgrade their seats at games, provides detailed maps of Sleep Train Arena and includes a virtual noise-making cowbell." Their approach is intended to make "the experience for those fans more seamless and hassle free."
There have been numerous reports that West Virginia Attorney General Patrick Morrisey issued a warning to consumers on Monday, January 13, 204, about a Target gift card scam occurring throughout the country on social media websites. Evidently, consumers are purportedly offered a Target gift card to make up for the widely-reported December data breach. This is apparently a scam that directs consumers to fake domains pretending to be Target. Morrisey warns that "[c]onsumers also need to be wary of fake domain names pretending to Target popping up." He further suggested that "[I]f consumers receive communications or offers appearing to be from Target, they should call Target to confirm the communication is legitimate and report any instances of fraud to our office."
Other Sources: Legal Newsline, W. Va. AG warns of Target gift card scam (Jan.
15, 2014); Register Herald, AG warns Target gift card offer is a scam (Jan.
13, 2014); Charleston Daily Mail, Attorney General says Target gift card offers are scams (Jan.
Image Source: Creative Commons
Joe Jensen, general manager of Intel's Retail Solutions Division, at the National Retail Federation Convention & Expo, New York, Jan. 13, 2014, confirmed that "Intel has been actively working with leading retailers and the industry for several years to enable retailers to use the Internet of Things to deliver more entertaining brand experiences while also reducing operational costs." Intel is "taking those efforts a step further by delivering more intelligent solutions and enabling retailers to make better use of big data to deliver a more personalized shopping experience."
Avid shoppers may be excited to learn that, as reported by Intel, "[w]ith Intel-based Shopping Anywhere, consumers can intuitively shop the looks from their favorite television programs right from their couch." Or, "[I]f a consumer prefers to bring the ease of online shopping with them in-store, the Intel® Core™ i7-based MemoryMirror* full-length, digital 'mirror,' allows store shoppers to virtually try on multiple outfits, and view and compare previous looks on the mirror or via smartphone or tablet." The mirror will use "Intel integrated graphics technology to create avatars of the shopper wearing various clothing that can be shared with friends to solicit feedback or viewed instantly to make an immediate in-store purchase." This approaches is expected to provide shoppers with "an engaging and seamless buying experience, regardless of where they are or what device they are using."
Additional Sources, Intel Newsroom, Intel Personalizes Shopping with Internet of Things, Big Data Technologies (Jan. 13, 2014)