Home / Binance.US Deal Gives SEC Visibility of EVERY Transaction Over $1,000 – Will IRS See These Too?
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Binance.US Deal Gives SEC Visibility of EVERY Transaction Over $1,000 – Will IRS See These Too?

Last Updated June 26, 2023 11:14 AM
Teuta Franjkovic
Last Updated June 26, 2023 11:14 AM
Key Takeaways
  • Binance US and SEC reached an ‘exhaustive’ agreement, according to an ex-SEC official
  • Binance must reveal every asset transaction over $1,000 since December 1, 2022
  • IRS may pay close attention to revenue earned from cryptocurrencies

Binance.US and the Securities and Exchange Commission (SEC) have struck an arrangement that, according to a consent decree , avoids the freezing of exchange assets in exchange for increased openness and control.

Will Binance Undermine Crypto Main Features?

According to the deal, Binance has exactly 45 days to submit to the SEC a list of every wallet or account it has been in charge of since December 1, 2022, along with the financial institutions and account numbers linked to each one. Additionally, Binance is required to provide a list of any asset transactions over $1,000 in value during the same time frame, along with the recipients’ names and the reasons behind the transfers.

Two essential characteristics of cryptocurrencies that set them apart from conventional financial systems are privacy and anonymity. While anonymity refers to the capacity to carry out transactions without disclosing one’s identity, privacy refers to the capacity to maintain the confidentiality of personal information.

Through the use of sophisticated cryptographic algorithms and decentralized networks, Bitcoin transactions may be conducted privately and anonymously, enabling users to send money without disclosing their names.

The growing number of people and organizations adopting this digital asset class shows how important privacy and anonymity are to cryptocurrencies. For instance, some consumers place high importance on privacy in order to safeguard their financial data from hackers or government snooping – and that’s what’s happening right there.

Binance’s Ethical Issues

But there are ethical concerns with cryptocurrency’s privacy and anonymity that need to be resolved. For instance, the secrecy of Bitcoin transactions can foster an environment where illegal activities like money laundering, financing terrorism, and cybercrime can flourish.

Additionally, the opaque nature of Bitcoin transactions can open a door for unethical activity like tax evasion.

Despite these moral quandaries, it is possible to protect users’ privacy and anonymity in cryptocurrencies while upholding moral principles.

For instance, regulators can enact anti-money laundering (AML) and know-your-customer (KYC) regulations that mandate Bitcoin exchanges confirm the customers’ identity. In order to ensure ethical activities, privacy and anonymity in cryptocurrencies should be balanced with the requirement for responsibility and transparency.

According to Binance , the company works “alongside partners, policy-makers and regulators to shape our robust compliance program and regulatory framework, and build a sustainable path forward for the blockchain industry”.

Some of the compliance initiatives include already mentioned Know Your Customer (KYC), anti-money laundering (AML), law enforcement request system, responsible trading program, and Binance tax reporting tool.

After the SEC filed an emergency order last week requesting the freezing of funds held by Binance.US holding companies and the repatriation of assets to the United States, the consent order was signed by United States District Judge Amy Berman Jackson.

With Binance agreeing to guarantee that a pair of Binance.US holding companies “maintains possession, custody and control in the United States of all fiat currency and cryptocurrency assets that are deposited, held, traded, or accrued by customers,” the deal will still result in asset repatriation.

Binance’s CEO CZ Zhao quickly tweeted his comment on how “user funds have been and always will be safe and secure on all Binance-affiliated platforms,” without mentioning anything regarding user protection.

Ex-SEC Official Calls the Deal Exhaustive

The deal was described as “unprecedented, exhaustive, and onerous” by John Reed Stark, a cybersecurity expert and former director of the SEC Office of Internet Enforcement.

He tweeted that in the SEC’s history, this consent order will be known as one of the most onerous, difficult, inconvenient, and broad-reaching decrees relating to cryptocurrency.

Stark commented the SEC has been given a position resembling that of a Binance.US independent consultant, a remedy frequently accorded to the SEC after it wins an enforcement action.

IRS Rules on Crypto In U.S.

According to the agreement, information on “encumbrances or limitations that would make them unavailable for transfer or withdrawal by customers… and whether there are sufficient assets to satisfy customer liabilities or meet customer claims for customer assets held on their behalf within 10 calendar days of service of such request,” are needed.

Additionally, Binance.US must make sure that neither Binance nor its CEO Changpeng Zhao, “or any Zhao-owned or Zhao-controlled entity,” are permitted access to any assets or control over them.

Last but not least, Binance.US will be required to submit monthly reports to the SEC detailing its “ordinary course business expenses.”

Be it as it may, the IRS will pay close attention to revenue earned from cryptocurrencies because they are no longer the newest financial asset.

Regulating crypto taxes  are still somewhat confusing, which is unfortunate. According to the IRS, depending on how you utilize cryptocurrency, it may be liable to capital gains taxes or income taxes.

First off, if you’re simply “hodling” cryptocurrency, you don’t owe taxes on it. However, if you make any money through cryptocurrency, whether by staking, lending, or selling, you might have to pay taxes on the earnings.

Since the IRS views all cryptocurrencies as capital assets, you must pay capital gains taxes when you sell them for a profit. When you sell more conventional products, like stocks or funds, for a profit, this is exactly what happens.

Conclusion

According to the IRS Guide, One should keep track of every cryptocurrency transaction they make, including the cost of the cryptocurrency, how long they kept it, and how much they received when they sold it. One should also save the receipts for each transaction. Additionally, one must record the cryptocurrency’s fair market value at the time it was bought or sold.

If one transfers coins between offline cold wallets and your account, the crypto exchange might not record the cost basis or the initial amount paid for cryptocurrency, even if it may give a 1099-B to the IRS.