Bitzlato CEO arrested by Spanish police: Report

Authorities seized an estimated $19.8 million worth of crypto, fiat and luxury goods from Bitzlato executives related to an ongoing money laundering investigation.

According to a Feb. 2 report by Turkish news agency Anadolu, Spanish authorities have arrested the CEO, sales executive and marketing director of Hong Kong cryptocurrency exchange Bitzlato. In total, six Russian and Ukrainian nationals related to the exchange were arrested in a joint effort between France, Portugal, Cyprus and United States law enforcement. 

As told by Spanish police, the exchange’s anonymity allowed it to become the platform of choice for criminal organizations seeking to launder money via cryptocurrency. Authorities seized $19.8 million (18 million euros) in digital assets, luxury cars, cash, smartphones and other items related to the investigation and blocked over 100 exchange accounts.

The move comes just two days after co-founder Anton Shkurenko stated in an interview that 50% of the Bitcoin (BTC) held in Bitzlato wallets could be withdrawn the same day the exchange relaunches after investigators seized approximately 35% of users’ funds held in the exchange’s hot wallets. Regarding this matter, Shkruenko also explained that the new Bitzlato will be based in Russia and “out of reach of law enforcement authorities.”

Related: Bitzlato kept a low profile, but did not go entirely unnoticed before DOJ action

On Jan. 18, the U.S. Department of Justice announced an enforcement action against Bitzlato, alleging that a lack of Know-Your-Customer and Anti-Money Laundering compliance helped cybercriminals launder over $700 million via the Bitzlato exchange. The same day, Bitzlato websites were shut down, with a portion of exchange funds seized by police. Its co-founder, Anatoly Legkodymov, a Russian national and resident of the People’s Republic of China, was arrested in Miami around the same day.

Bitzlato homepage after enforcement action 


Avalanche ‘bull trap’ risks pushing AVAX price down by 30% in February

The price of AVAX has more than doubled in 2023 but a growing divergence between several key metrics hints at a bearish reversal ahead.

Avalanche (AVAX) bulls should brace themselves for impact led by a growing divergence between severalkey indicators on the daily-timeframe chart.

AVAX price chart paints bearish divergence

The daily AVAX chart shows a classic bearish divergence between its price and relative strength index (RSI), a momentum oscillator forming since Jan. 11.

In other words, the price of AVAX has been making higher highs since the said date. But, on the other hand, the coin’s daily RSI has been forming lower highs. This divergence suggest a slowdown in the  momentum of the AVAX/USD pair, which may lead to a price reversal.

AVAX/USD daily price chart. Source: TradingView

In addition, the declining volumes during the course of AVAX’s ongoing uptrend also hints at the same bearish cues.

The price-RSI and price-volume divergences appear as AVAX price continues its 2023 uptrend . Notably, Avalanche has rallied by more than 100% year-to-date to $22.50 as of Feb. 2, helped by improving risk-on sentiments and  news of its partnership with Amazon.

On Jan. 31, Avalanche partnered with Intain, a structured finance platform that facilitates more than $5.5B in assets across more than 25 deals to run its digital marketplace IntainMARKETS via IntainMARKETS Subnet.

The price of AVAX rallied nearly 20% after the announcement.

Avalanche price risks drop 30% in February

AVAX’s price has successfully closed above two key resistance levels: a multi-month descending trendline (blacked) and its 200-day exponential moving average (200-day EMA; the blue wave) during the ongoing rally. 

AVAX/USD daily price chart. Source: TradingView

Avalanche now eyes a breakout above $22.75, which has been serving as resistance since August 2022, for a potential breakout to $30 as its next upside target. This level also coincides with the falling wedge breakout target discussed in this analysis.

In other words, an approximately 30% gain from the current price levels. 

Conversely, a pullback from the resistance level, fueled by the bearish divergence indicators discussed above, could send AVAX price toward its 50-day EMA (the red wave) at approximately $15-$16, down about 30% from current prices.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.


Solana DeFi protocol Everlend shuts down over liquidity issues

With FTX’s ripple effect on market liquidity, Everlend is closing its doors and urging clients to withdraw funds.

Solana decentralized finance (DeFi) protocol Everlend Finance is closing down its operations and urging clients to withdraw funds from the platform.

The company announced the decision on Twitter on Feb. 1, stating that despite having “enough runway” to continue operating, it would be a gamble under current market conditions. In particular, Everland’s team noted:

“Unfortunately, rn liquidity is just not there and this is so not just about Solana and the B/L market (on which Everlend is 100% dependent) keeps shrinking. In these conditions pressing forward is a gamble. And even though we had enough runway, we decided to stop now.”

Everlend also noted that deposits from underlying protocols are now in vaults, and the app will be in withdrawal-only mode until the funds are cleared. “[W]e suggest our users withdraw their funds asap.”

The team announced that all raised and unused funds, along with third-party contractor payments, will be “covered” in the next two weeks, indicating that relevant parties will be made whole. The protocol will also open-source its codebase, allowing others to continue building solutions on it.

We are deeply saddened to announce that as of today our team has decided to close down and won’t continue its development

— Everlend (@EverlendFinance) February 1, 2023

Founded in 2021, Everlend’s roadmap for the coming months included the launch of its governance platform and money market. Investors in the protocol included GSR, Serum and Everstake Capital.

According to DeFi Llama, Everlend held almost $400,000 in total value locked (TVL) during its peak. However, the protocol suffered a significant decline in the wake of FTX’s collapse, which had a negative impact on market liquidity. 

Everlend is the second Solana-based DeFi protocol to shut down within a few days due to crypto winter. On Jan. 27, Friktion platform announced it would be closing down its user interface, citing a “tough market for DeFi growth” for its decision.

The move came nearly a year after Everlend announced it had raised $5.5 million in a funding round. In November, the company even launched undercollateralized lending targeting institutional investors’ demand for DeFi, shortly before FTX contagious struck.


The Magic of the U.K.’s Ancient Stone Circles: Will We Ever Know the Truth?

With a title like that, it’s clear to see what this article is about! Let’s begin. Our foray around the United Kingdom begins. Back in August 2000, a man named David Farrant – a now-late, self-described vampire-hunter, and the author of The Vampyre Syndrome, Shadows in the Night, and Beyond the Highgate Vampire – claimed to have seen, late one night, the stones that comprise Kit’s Coty House, spinning at an absolutely furious speed, but without affecting or damaging the formation in any way, at all. And, with not even a solitary bit of damage to the surrounding grass when the spinning was over, either. Farrant said that on that appropriate dark, August night, he was hanging out at Kit’s Coty House to perform a midnight ritual that, he said, was designed to bestow wealth on he or she that cracks the secrets of the moving stones of Kit’s Coty House. Farrant – in a fascinating, but cloak and dagger type fashion – claimed that he had cracked the secrets of moving the stones of the county of Kent. He said the answer was (in one, single word): magnets. Rather frustratingly, that’s all Farrant would say. However, the strange issue of magnets raising heavy and large stones will crop up later – and in an equally fascinating story.


Neanderthals Impressively Hunted and Butchered Massive European Elephants

During the Middle and Late Pleistocene eras, between 781,000 and 30,000 years ago, Europe and Western Asia were ruled by a massive beast – the straight-tusked elephant (Palaeoloxodon antiquus). These massive pachyderms put modern elephants to shame – they reached 4.2 meters (13.8 feet) in height, and weighed up to 16.5 ton (33.000 pounds). For comparison, today’s African bush elephants, the largest modern pachyderm, top out at 13,000 pounds and 11 feet in height. One would think that no other animal or human ancestor would mess with a colossal straight-tusked elephant. One would be wrong. New research shows that one extinct species of archaic humans was brave enough to hunt, kill and butcher the giant straight-tusked elephant – the Neanderthals. Wait … what? How did the Neanderthals accomplish this impressive feat … and why didn’t that skill and all that meat prevent them from becoming extinct?


Senate Banking Committee’s priorities for new Congress include crypto: Report

Senator Tim Scott, who became the committee ranking member following the departure of Pat Toomey, reportedly plans to make a crypto regulatory framework a priority in 2023.

South Carolina Senator Tim Scott, the Republican ranking member on the United States Senate Banking Committee, reportedly plans to develop “a bipartisan regulatory framework” for cryptocurrencies.

According to a Feb. 2 report from Politico, Scott included the crypto framework as one of his priorities for the 118th Congress. He reportedly was skeptical of some aspects of crypto, alluding to the collapse of exchanges like FTX — “high-profile failures resulted in lost consumer assets” — and potential uses for illicit finance.

Scott recently took over the ranking member position from former Senator Pat Toomey, who served out his term without seeking re-election. Toomey supported many legislative efforts encouraging innovation in the digital asset space, while committee chair Sherrod Brown called on Treasury Secretary Janet Yellen to work with financial regulators and lawmakers on comprehensive crypto legislation.

Related: US Senate banking chair floats possibility of banning crypto

The Senate Banking Committee held a hearing in December aimed at exploring the collapse of FTX, with the possibility of continuing its investigation in a new session of Congress in 2023. The House Financial Services Committee, under the leadership of Representative Patrick McHenry, may likewise hold another hearing on FTX.

With the Republican Party taking control of the House of Representatives, McHenry has the authority to set the legislative agenda for the financial committee. He reportedly plans to create a new subcommittee focused on digital issues, given the “big hole” in previous committee structures.


Tether CTO Paolo Ardoino on taking the bull by the horn

Stablecoins may have suffered an identity crisis in 2022, but Tether chief technology officer Paolo Ardoino is bullish about the utility the sector provides.

Stablecoins have been under much scrutiny since the implosion of the third-largest stablecoin by market cap, TerraUSD (UST), in May 2022. The UST saga led to a lot of skepticism that caused consumers to question the safety of stablecoins. 

In the seventh episode of Hashing It Out, Cointelegraph’s Elisha Owusu Akyaw (GhCryptoGuy) interviews Paolo Ardoino, Tether’s chief technology officer, about how stablecoins work, and the two discuss frequently asked questions about stable tokens.

Fear, uncertainty and doubt (FUD) rocked the boats of stablecoin issuers after TerraUSD depegged in 2022. Tether was one such issuer at the receiving end of the FUD. Ardoino claimed that some of the FUD was being spread privately and publicly by competitors. Nevertheless, the Tether chief technology officer said that the FUD only served to improve trust between consumers and the company.

“I like the FUD so much because we can respond to it with facts.”

One such fact was the ability of the company to withstand the pressure that came as a result of panic in the market. Ardoino pointed out that Tether was able to process $7 billion in redemptions in 48 hours, which was 10% of the company’s reserves. According to him, it was an achievement that will be recorded in the history books of global finance.

On how to ensure that the industry does not again end up in a situation similar to what happened with TerraUSD, Ardoino argued that developers should stick to making stablecoins the traditional way and avoid the more experimental algorithm-based method. He believes that algorithmic stablecoins are inefficient and unsafe.

Related: Bitcoin advocate Najah Roberts explains why BTC is a tool for empowerment

Furthermore, Ardoino mentioned that algorithmic stablecoins might work only in instances where the stablecoin is heavily collateralized with more proven cryptocurrencies like Bitcoin (BTC) instead of cryptocurrencies issued by the same developers building the stablecoin.

“The problem with Terra was that their backing was a token they also created. Tether’s backing is the U.S. treasury bills, is the U.S. economy, so you cannot have traders attacking us because we have all the reserves.”

In the episode, the two also discuss:

How stablecoins work Algorithmic stablecoins vs. traditional stablecoinsThe TerraUSD deppeging sagaUse cases of stablecoins in developing economiesTether Peso and Tether Gold “Stablecoins war”: Tether (USDT) vs. USD Coin (USDC) vs. Binance USD (BUSD)Stablecoin regulationCentral bank digital currencies vs. stablecoins

Listen to the full episode on Spotify, Apple Podcasts, Google Podcasts, or TuneIn to get all the insights on stablecoins and Tether. You can also check out Cointelegraph’s catalog of shows on the new Cointelegraph Podcasts page.


Top 7 blockchain courses and certifications for beginners

Blockchain courses and certifications help individuals understand the underlying principles and applications of blockchain technology.

Blockchain courses and certifications can play an important role in helping individuals gain a comprehensive understanding of blockchain technology and its applications. By completing these courses, individuals can develop technical skills, stay current with industry developments, enhance their career opportunities and increase their earning potential.

Here are seven blockchain courses and certifications for beginners.

INE’s Blockchain Security

INE’s Blockchain Security course is an online course offered by Internetwork Expert (INE) that provides a comprehensive overview of the security aspects of blockchain technology. The course covers various topics such as consensus algorithms, cryptography, network security, smart contract security, and blockchain attacks and defenses.

Related: What is a smart contract security audit? A beginner’s guide

This course is available as a monthly or annual subscription. The course is suitable for security professionals, developers and anyone interested in learning about blockchain security and how to secure blockchain solutions. There are seven modules in the course, as follows:

Blockchain security fundamentalBlockchain security advanced conceptsBlockchain risk managementBlockchain auditsVulnerabilities and vulnerability remediationBlockchain platform security considerationsCourse review

Throughout the course, students will be exposed to hands-on projects, case studies and real-world examples that help reinforce the concepts covered in each section. The course is modular, allowing students to learn at their own pace and revisit topics as needed.

Certified Enterprise Blockchain Professional (CEBP)™

Certified Enterprise Blockchain Professional (CEBP)™ is a professional certification program offered by 101 Blockchains, an industry-leading provider of training and research in the area of enterprise blockchain. The course is organized week by week into the following topics and can be completed in four weeks:

Blockchain technology fundamentalsEnterprise blockchain platformsBlockchain in trade financeBlockchain applications and use cases

The CEBP™ certification is intended for professionals involved in the development, implementation and management of blockchain solutions in their organization. It demonstrates the individual’s expertise in the field of blockchain and can enhance their career opportunities and marketability. The overall cost of the certification course is $399.

To earn the CEBP™ certification, candidates must pass a comprehensive exam (20 multiple-choice questions) that covers topics such as blockchain architecture, cryptography, consensus algorithms and smart contracts, among others. The exam is designed to test the individual’s knowledge of the concepts and their ability to apply that knowledge in real-world scenarios.

Certified NFT Professional (CNFTP)™

The Certified NFT Professional (CNFTP)™ is a certification program offered by 101 Blockchains that focuses on the concept of nonfungible tokens (NFTs) and provides a comprehensive understanding of the technology and its applications.

The program likely covers a range of modules related to NFTs, including:

Blockchain fundamentalsToken fundamentalsNFT fundamentalsNFT use casesNFT benefitsNFT challenges and risksHow to get started with NFTsHow to create your first NFT collectionTrading NFTs

This certification course is valid for a lifetime at the price of $179. By completing the Certified NFT Professional (CNFTP)™ certification program, individuals can demonstrate their expertise in nonfungible tokens and their potential applications, making them more competitive in the job market. The certification can also help individuals stay up to date with the latest developments and trends in the NFT space.

Certified Blockchain Expert (CBE)

Certified Blockchain Expert is a professional certification offered by the Blockchain Council. It is designed to verify the skills and knowledge of individuals in the field of blockchain technology. The course features various modules, including:

Introduction to courseOrigin of blockchain technologyIntroduction to blockchainTokenize everythingBlockchain ecosystemBlockchain miningTransactions UTXO vs. account modelSecurity and privacyOther consensus mechanisms in blockchainBlockchain solutions – steps and measuresUse-cases of blockchainOther use-cases of blockchain

This self-paced course is available for $179. To earn the CBE certification, candidates must pass a comprehensive exam (conducted for a total of 100 marks) with 60 or more marks. The exam covers topics such as blockchain architecture, cryptography, consensus algorithms, smart contracts and other related topics. The exam is designed to test the individual’s understanding of the concepts and their ability to apply that knowledge in practical scenarios.

Blockchain Specialization

The Blockchain Specialization is a series of courses offered by Coursera in partnership with the University of Buffalo and the State University of New York. The specialization covers the fundamental concepts and technologies behind blockchain and how they are used to build secure, decentralized applications.

There are four courses in this specialization, namely:

Blockchain basicsSmart contractsDecentralized applications (Dapps)Blockchain platforms

Each course includes a mix of video lectures, quizzes and hands-on projects to help learners apply their knowledge and develop practical skills. The Blockchain Specialization is intended for professionals and students interested in learning about blockchain technology and its applications. Completing this specialization can help individuals develop the skills and knowledge needed to work in the field of blockchain technology and enhance their career opportunities.

Blockchain A-Z™: Learn How To Build Your First Blockchain

Blockchain A-Z™: Learn How To Build Your First Blockchain is a course offered by Udemy that teaches the basics of blockchain technology and how to build a blockchain from scratch. The course is designed for individuals who are new to blockchain and want to learn how it works and how to create a blockchain solution. The course costs $74, includes 14.5 hours of on-demand video and includes modules like:

How to build a blockchainHow to create a cryptocurrencyHow to create a smart contract

Related: A step-by-step beginner’s guide to creating your first cryptocurrency token

The course includes video lectures, quizzes and hands-on projects to help learners apply their knowledge and develop practical skills. By completing this course, individuals can gain the knowledge and abilities necessary to work in the field of blockchain technology and improve their employment options.

Blockchain – Principles and Practices

Blockchain – Principles and Practices by Pluralsight is an online course that provides an introduction to the concepts and practices of blockchain technology. The course covers the basics of blockchain, including its history, architecture, consensus algorithms and security.

It also explores various use cases for blockchain in various industries, such as finance, supply chain and healthcare. To access this course, users must have a Pluralsight membership, which is about $29 per month or $299 per year. Free access to this course is also available with a 10-day free trial. The table of contents of this course is organized as follows:

Course overviewIntroductionUnderstanding the cryptographic principles used with the blockchainStoring transactions in blocksApplying proof of workMaintaining consensusCourse summary

The course is designed for those new to blockchain technology, but it may also be helpful for those who want to deepen their knowledge and expertise in this field. Individuals can learn the underlying principles of blockchain and how the technology can be applied to real-world scenarios by completing this course.


Developers seek solutions for Web3-related scams from internet browsers

A new suite of tools for Web3 businesses targets the safety and security of transactions, websites and smart contacts to combat exploits.

A big concern for users in decentralized finance (DeFi) is its susceptibility to exploits. A report from Privacy Affairs revealed hackers stole $4.3 billion worth of cryptocurrency from January to November 2022 — a 37% increase from the previous year.

Such exploits harm the integrity of companies and fuel skeptics from outside of the space in their case against cryptocurrencies. However, in a Feb. 2 announcement from Web3 Builders, the company revealed a suite of tools to combat this issue.

The initial browser extension TrustCheck was created to flag Web3-related scams before users continue to interact with them. This new suite of tools builds on that via a Web3 Builders transaction checker, website checker and smart contract checker.

Ricky Pellegrini, the CEO of Web3 Builders, said this is an integral moment for the industry to prove its trustworthiness.

“It’s an unfortunate truth that scams and fraud are still common in the Web3 space.”

According to the announcement, the tools scan nearly 30 million suspicious domains daily and check for vulnerabilities on around 55 million Ethereum smart contracts. 

Related: DeFi-type projects received the highest number of attacks in 2022: Report

He continued to say that, even in the last month, the suite of tools discovered dozens of scams listed on popular platforms, marketplaces and exchanges.

In the last week, there has been a slew of new attacks that have been exploiting millions from the space. This includes one on Feb. 1, in which the BonqDAO protocol lost $120 million after an oracle hack.

Last week, hackers compromised Azuki’s Twitter account and stole $758K in just 30 minutes. The financial services platform Robinhood also had its Twitter hacked on Jan. 25, during which hackers tried to promote a scam token.

Nicholas Horelik, the technical co-founder and chief blockchain officer at Web3 Builders said, understanding what’s happening with your transaction is critical in keeping assets safe.

“End users deserve to have this functionality on whatever platform they choose and businesses should be implementing solutions like these to ensure their customers’ safety in Web3.”

On Jan. 24, the Wormhole hacker moved $155 million of the total $321 million stolen, which was the biggest shift of stolen funds seen in months.  


What crypto hodlers should keep in mind as tax season approaches

Filing crypto taxes can be complex, especially for those exploring the decentralized finance world. Here’s what to keep in mind.

Filing taxes for cryptocurrency can be a confusing and daunting task for many individuals. The United States Internal Revenue Service (IRS) treats cryptocurrency as property subject to capital gains taxes. Knowing this appears to make filing crypto taxes simple, but crypto’s unique nature means there are many unanswered questions.

Accurately reporting gains and losses can be a nightmare. While everyone concerned about tax season knows that keeping accurate records of every crypto transaction is a must, there are other things to keep in mind.

There is a difference between short-term and long-term capital gains taxes, with tax rates varying depending on multiple factors. These capital gains tax rates are available online and are beyond the scope of this article, which will focus on avoiding potential issues with the IRS while filing taxes on crypto.

How to report crypto taxes

Filing cryptocurrency taxes isn’t a choice; it’s an obligation that every individual and business has. Those who keep track of their transactions — including the prices of the cryptocurrencies they transact — will have an easier time reporting their activities.

Even those who haven’t received any tax documents associated with their cryptocurrency movements may have taxable events to report. Speaking to Cointelegraph, Lawrence Zlatkin, vice president of tax at Nasdaq-listed cryptocurrency exchange Coinbase, said:

“Crypto assets are treated as property for U.S. tax purposes, and taxpayers should report gains and losses when there is a sale, exchange, or change in ownership (other than a gift). Merely HODLing or transfers of crypto between a taxpayer’s wallets are not taxable events.”

Zlatkin added that more advanced trading “where there is a change in economic ownership, literally or substantively, may be taxable,” even if the taxpayer doesn’t receive an IRS Form 1099, which refers to miscellaneous income.

Meanwhile, Danny Talwar, head of tax at crypto tax calculator Koinly, told Cointelegraph that investors can report cryptocurrency gains and losses through Form 8949 and Scheduled D of Form 1040.

IRS building in Washington D.C. Source: Joshua Doubek

Talwar said that investors with cryptocurrency losses after last year’s bear market might be able to save on current or future tax bills through tax loss harvesting.

Tax loss harvesting refers to the timely selling of securities at a loss in a bid to offset the amount of capital gains tax that would be payable on the sale of other assets at a profit. The strategy is used to offset short-term and long-term capital gains. Coinbase’s Zlatkin addressed this strategy, saying, “losses from sales or exchanges of crypto may result in capital losses which can be used to offset capital gains and, in limited circumstances for individuals, some ordinary income.”

Zlatkin added that losses “may not have been sufficiently crystallized from pending and unresolved bankruptcy or fraud,” adding:

“Taxpayers should be careful in how they treat losses and also consider the possibility of theft or fraud losses when the facts support these claims.”

He said that crypto investors should consult their tax advisers regarding any available tax breaks or deductions. Investors should also be aware of losses from “wash sales,” which Zlatkin described as “sales of crypto at a loss followed soon thereafter by the repurchase of the same type of crypto.”

Speaking to Cointelegraph, David Kemmerer from cryptocurrency tax software company CoinLedger, said that losses realized in 2022 can be an “opportunity” to reduce a tax bill, with capital losses offsetting capital gains and up to $3,000 of income per year.

David Kemmerer added that it’s “important to remember that exchange and blockchain gas fees come with tax benefits,” as fees “directly related to acquiring cryptocurrency can be added to the cost basis for the asset.”

He added that fees related to disposing of a cryptocurrency could be subtracted from the proceeds to help reduce capital gains taxes.

While the IRS has somewhat clear guidance on taxes owed from buying and selling cryptocurrency, tax forms for those involved in the sector can get more complex if they delve deep into, for example, the world of decentralized finance (DeFi).

Tax complexities with DeFi, staking and forks

Using DeFi can be complex, with some strategies involving multiple protocols to maximize yield. Between cryptocurrency-backed loans, transactions involving liquidity provider tokens and airdrops, it’s easy to lose track.

According to Coinbase’s Zlatkin, “most forms” of cryptocurrency rewards or yield are subject to U.S. tax when received.

He said that current U.S. laws on staking income are “undeveloped,” with the IRS treating staking rewards as “giving rise to taxable income when an individual taxpayer receives staking rewards over which the taxpayer has ‘dominion and control,’ or basically when the asset can be monetized.”

When it comes to airdrops and forks, CoinLedger’s Kemmerer noted that income from cryptocurrency forks and airdrops is subject to income tax, just like income from any other job. He said that when a fork or an airdrop lead to new cryptocurrency being earned, investors “recognize ordinary income based on the fair market value” of that crypto at the time of receipt.

Cryptocurrencies, nevertheless, go beyond these use cases. Many use crypto debit cards in their day-to-day lives, which means that in the eyes of the U.S. government, they’re paying for goods and services using property. What happens when it’s time to tell the IRS?

Tax implications of using crypto for payments

While defining cryptocurrency payments as property transactions sounds like a complex ordeal, according to Kemmerer, using crypto as a payment method is “considered a taxable disposal, just like selling your crypto or trading your crypto for another cryptocurrency.” He added:

“If you use your cryptocurrency to make a purchase, you’ll incur a capital gain or loss depending on how the price of your crypto has changed since you originally received it. “

Coinbase’s Zlatkin said this is true “even if the transaction is small, like buying a cup of coffee or a pizza.” If a payment is taxable when made with cash, it remains taxable with crypto, he added, stating:

“Furthermore, the recipient is generally treated as if they received money in the transaction and subsequently purchased the cryptocurrency with that money, and they are taxed accordingly.”

At this point, it’s clear that filing taxes related to cryptocurrency transactions is a complex process that needs to be well thought out. Cryptocurrency users need to consider all of this and avoid common pitfalls.

Keeping records is vital

Tax experts have repeatedly stressed that keeping records of every cryptocurrency transaction is key to avoiding incidents with the IRS. CoinLedger’s Kemmerer noted that without accurate records, “it can be difficult to calculate capital gains and losses.”

He added that records should include the date that users originally received their cryptocurrency and the date they disposed of it. This should be accompanied by the cryptocurrency’s price at the time of receipt and disposal.

The newly-added crypto question on United States tax form 1040. Source: CNBC

Koinly’s Talwar told Cointelegraph that it’s “often easy to miss the number of taxable events which may occur during the year” because acquiring and spending cryptocurrency is “becoming more accessible than ever, with exchanges and products providing seamless user interfaces.” Talwar added:

“It is easy to misunderstand when a taxing point arises for crypto. Many people don’t realize that their staking rewards are taxed as income when received, even if they haven’t sold the underlying staked asset.”

Talwar advised those heavily involved in cryptocurrency to consult a tax professional during tax season to help them figure everything out.

Filing crypto taxes can be daunting for many, adding a new layer of complexity to an already hard-to-grasp sector that’s constantly evolving. Offsetting tax bills with potential losses can incentivize sophisticated investors to take risks in the space, as even their losses can help reduce their tax burden.

As the law is still unclear regarding some of the cryptocurrency sector’s more complex operations, those who prefer to avoid risks and stay on regulators’ good side should consider avoiding DeFi. Either way, consulting with a professional is less expensive and less stressful than dealing with fines and enforcement actions from tax authorities.

This article does not contain tax reporting advice or recommendations. Readers should conduct their own research and consult a professional when filing taxes on their investments and holdings.

Generated by Feedzy