Peter Edgar is Chief Financial Officer at Huboo, a pan-European fulfilment technology provider. In this guest post today, he argues that investment and export incentives are needed to curb the mounting pressure on the UK economy Why investment and export incentives are needed to curb the mounting pressure on the UK economy Depending on the prevailing […]
FOV Ventures is a newly formed venture capital firm which plans to invest in early-stage metaverse startups. The firm says it has raised an initial $18.1 million as part of its first fund. Founding partners David Haynes and Petri Rajahalme announced this month FOV Ventures, a Finland-based early-stage VC firm through which the duo plans to […]
Cryptocurrencies have grown over the past time to reach new heights and a market capitalization that cannot be ignored. Consequently, more people have joined in the hype, ranging from developers, investors, and founders of various crypto-based projects. Over time, more use cases for crypto come up to sustain their growth and lead the world to the next finance phase. Among them, staking has grown and become common over the past year as Proof-of-Stake rose. Staking is a way of rewarding participants in the blockchain system. Through staking, users assist in validating transactions in the blockchain hence minting additional coins through the digital assets they own. Stakers, on the other hand, face an unclear tax regulatory landscape in terms of taxation of their activity on PoS platforms. Since the IRS has not issued clear guidance on staking rewards, taxation has been contentious for many years. Since the IRS did not provide this guidance, many taxpayers opted to report income when they received rewards. Crypto Staking on Blockchain PoS networks are decentralized, so they do not have a central authority to oversee transactions. To ensure that transactions are conducted properly, they rely on a consensus mechanism that enables participants to verify transactions. Notably, validators provide the consensus of the PoS system. To become a validator, users must submit a transaction to the network. The network will randomly select validators based on their percentage of crypto assets. Those not chosen will attest to the validity of transactions contained within the block proposed by the chosen validator. Validators are rewarded for creating new blocks and performing good faith transactions. If they fail to do so, they risk losing their crypto assets. Validators who implement this approach add new blocks to the blockchain, which keeps the network’s integrity intact. Taxation Efforts Through Notice 2014-21 Currently, no financial regulator has enacted any tax guidance on cryptocurrency staking. However, the IRS Notice 2014-21 states that any taxpayer engaging in “mining” virtual currency is liable to ordinary income tax on the additional virtual currency obtained from such operations. Mining, in this case, is the process by which blockchain is verified by proof of work. It entails solving mathematical computations through computers. On the other hand, the Revenue Ruling 2019-24 states that an “airdrop” of new crypto after a hard fork results in income. However, there is a condition that taxpayers should have total dominion over the cryptocurrency at the time of the airdrop. In light of the Service’s position in the Notice, a more conservative place would define stakers recognizing gross ordinary income upon receiving reward tokens. Despite the differences between mining and staking, both involve creating and validating blocks on a network. To this end, it would be more appropriate to view the “staking” of crypto assets as a process of entry into the crypto community rather than an investment instrument with a capital return. Deductibility of Expenses Another factor to examine is the deductibility of staking-related expenditures. In the lack of specific IRS guidance, the answer appears to be whether a taxpayer’s staking operations qualify as a trade or business. If the activities are related to a trade or a business, these expenses should be deductible. Generally, a taxpayer should only consider the time and effort involved in carrying out the activities. However, if the IRS considers the activities a hobby, these expenses are not deductible. Likewise, if the taxpayer engages in investment activities, these expenses are not deductible. The Jarrett v. U.S. Case Sheds More Light Another milestone in taxation in crypto is the Jarrett v. U.S. case. Joshua Jarrett staked his existing Tezos tokens on the Tezos public blockchain in 2019, whereby he contributed to creating new blocks. He made a total of 8,876 Tezos tokens due to Jarrett’s staking rewards. The value of Jarrett and Jessica’s staking rewards was reported as ordinary income on their 2019 joint federal income tax returns, and they paid taxes accordingly. In July 2020, the couple filed an amended tax return claiming that their rewards were not taxed. The IRS did not respond to their request for a $3,793 refund. This move prompted the pair to sue for a refund in 2021. The U.S. Department of Justice told the Jarretts that the IRS would refund the amount with interest. However, they rejected the offer due to the agency’s failure to provide a reason for the refund. The trial in the case has been scheduled for March 2023. However, in February 2022, the government indicated that it would ask the judge to dismiss it because it was moot. Not so Good News? The IRS’s refund offer has raised concerns about the taxation of certain types of rewards. First, the IRS’s decision not to pursue a case involving staking rewards suggests that the agency believes that these are taxable. Hence, getting a better case elsewhere. The … Continued
LifeForce Games, a blockchain video game development studio, today announced the successful completion of its $5 million seed round. The round was led by Lemniscap with participation from CMT Digital, Sfermion, Hartmann Capital, Sterling VC, as well as Ready Player DAO and Neon DAO. Most of the $5M raised from the round will go toward […]
The AI-Powered Communications Protection Software Will Use the Funds to Empower More Companies to Foster Inclusive, Compliant and Fair Business Communications
Styleriser Inc. received an investment from Ideaship, a patent leveraged venture capital firm that provides intellectual property development support for early stage startups.
Mutual fund giant Capital Group recently reduced its stake in Wynn Macau, grossing $11.5 million in proceeds after selling just over 19.45 million shares of the gaming operator last week. California-based Capital Group, which issues mutual funds under the American Funds brand, now own 5.73 percent of Wynn Macau equity, down from 6.10 percent. Wynn […]
HubSpot – which stores users’ names, email addresses and phone numbers – said that the breach was a “targeted incident focused on customers in the cryptocurrency industry”
Reuters | Huw Jones | Mar 15, 2022 LONDON, March 15 (Reuters) - The London Stock Exchange Group (LSEG) said on Tuesday it had teamed up with digital private asset platform Floww to enter the market for unlisted companies that want to raise capital. Britain is reforming its capital market after leaving the European Union