The exponential growth and admiration for digital assets is continuing to see large numbers of adoption. As the digital asset market matures and even enters into the mainstream world, governments and institutions like the IRS are beginning to solidify the foundation for legitimate legal framework.
The current traditional financial infrastructure is one based on the past, but companies today are trying to bring the past into the future through the use of blockchain and digital asset technologies. When Facebook announced Libra, governments and the world woke up to the fact that digital currency is here to stay – in some shape or form.
In this new age of digital assets and cryptocurrencies, the intricacies, complexities and cryptographic nature of the industry is wrought with emerging challenges. This is why it is important to begin educating the world on the smartest means and methods to track and manage crypto assets. It no longer matters which crypto coin will “win” and become the “digital currency of the future”, instead, it is more important to not overlook the challenges for businesses, individuals and investors of any size to take control of their digital assets with the right crypto tracking and management solutions.
In this blog post we dive into how and why crypto asset management will play a pivotal role for the next generation of cryptocurrencies and how the world will interact with them on a multitude of levels. It’s important to understand that in the endeavour to break-free from traditional institutions, people must feel empowered to do so.
- Cryptocurrencies and digital assets are plentiful and continue to grow in volume and value. For simple investors or institutional investors, managing digital assets is problematic and confusing
- The future of taxation may be unknown but the pending outlook from the IRS and government regulatory bodies will undoubtedly seek to employ changes that require strict accordance of taxation payments annually for investors of any kind. But, managing digital assets and preparing for crypto taxes is becoming increasingly difficult for today’s businesses and crypto operations.
- Technology is continuing to be the most dominating force for assisting finance teams, crypto companies, tax practitioners and bookkeepers with handling their crypto asset management, tracking and accounting.
Cryptocurrency Is Confusing
When the average crypto investor joins the game, they usually only have a few assets at low volume. But for the High Networth Individuals and companies, they must handle millions in crypto, across dozens of accounts, currencies and complex factors that create difficulties when managing crypto assets.
For example, some of Blox’s crypto customers like a decentralized exchange face seemingly impossible challenges when it comes to organizing and managing their diverse flow of cryptocurrencies. A crypto exchange, will have thousands of actively trading users. To trade you need a crypto wallet, crypto currencies and other essentially.
For the exchange, their finance team needs smarter tools the ability to effectively track and manage all their profit and loss, payments, payroll, overhead, and the various costs they must incur. Today, the leading crypto companies and blockchain business leverage the Blox platform to protect their bottom line and improve financial accounting efficiencies.
The platform makes it easy to organize and locate all vendors, clients, staff and payroll information in an easy-to-use interface. Any and all transactions can be reviewed, labelled and organized into groups. For the CPA’s and bookkeepers in the back office, they have access to the smartest tools like the new automated cost basis calculator for accurately calculating your companies profit & loss.
Crypto Tax Is Coming For You
Between the May 2014 announcement from the IRS regarding crypto holders filing their taxes, and the October 9th announcement over new legal framework for crypto taxations – it is fair to say that the crypto tax authorities are coming for you.
The importance of this announcement will help crypto investors and professionals to better understand how to apply the law and procedure for cryptocurrency cost basis on taxable events.
The October IRS announcement focused on addressing 3 key elements:
- Understanding the tax liabilities created by cryptocurrency forks
- The acceptable methods of valuing cryptocurrency received as income
- How to calculate taxable gains when selling cryptocurrencies.
Essentially, this means that tax practitioners, crypto company finance teams and bookkeepers as well as your entry-level investors will all have more guidance than ever before. But as these new answers arrive, it seems as if even more questions are beginning to rise to the surface.
“I think every crypto company, investor and tax professionals especially, are full of excitement and nervousness as this new guidance will surely answer some questions but will leave many with an entirely new set of queries. But this is part of the industry’s growing pains. The Blox R&D team is already at work integrating these new legal regulation into the Blox crypto asset management platform.” Said Alon Muroch, CEO and CO-Founder of Blox.io
You can learn more about this new announcement from the IRS in greater detail on the Blox Blog.
Technology To The Rescue
While tax authorities and tax professionals huddle together to determine how best to move forward with this latest news, technology is still working diligently and silently in the background. The Blox platform is one of the leading crypto solutions for crypto companies and blockchain businesses in need of crypto asset tracking and management solutions.
The Blox Crypto Accounting Report, established in mid 2018, discovered that technology is expected to be one of the most important tools in allowing the industry to flourish and to technically handle this next generation of crypto accounting, taxation and asset management
A colleague of Blox and world-renowned tax professional, Sharon Yip of Crypto Tax Advisors had some interesting insights into the importance of technology and software for the industry’s future well being.
“We hope it will help more crypto investors understand that they need to keep detailed records about their cryptocurrency transactions, utilize a crypto tax software to help them correctly calculate their trading gain/loss, income and spending, gifting etc. Last but not the least, we believe all tax practitioners should get themselves well equipped in handling cryptocurrency taxation, and crypto investors should get professional help rather than trying to tackle complicated crypto tax reporting themselves.” – Said Sharon Yip, CPA and Founder of Crypto Tax Advisors.
Where do we go from here?
This news came as a welcome surprise to the entire industry and governments around the world, as this is one of the first and few times that clear-cut laws have been expressed by the IRS, which until today has remained relatively quiet on the matter.
While this means there is further transparency, the future of legal framework for crypto taxation still remains opaque – but today, a ray of sunshine has started to seep through. Millions of cryptocurrency lovers, enthusiasts, investors and professionals are actively anticipating the next round of news – both potentially good, or bad. Only time will tell.
This article was published as part of TFA Voices, bringing expert opinion and industry expertise on a range of topics. It may include advertorial or sponsored content. To find out more about featuring in TFA Voices, get in touch.