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Aarika Rhodes, an elementary school teacher mounting a left-leaning primary challenge against California Democrat Brad Sherman, the most prominent critic of cryptocurrency in the House, is promoting the technology in her run. She said she has taken several thousand dollars worth of donations in cryptocurrency to date, having embraced it after talking to voters and hearing from crypto advocates who urged her to draw a distinction with Sherman on the issue.

More and more people of color, women, single moms are looking into Bitcoin, the largest cryptocurrency, Rhodes said. I never met anyone who was against it.

Roughly one in six Americans have personally traded, used or invested in cryptocurrency, according to Pew Research Center, including 13 percent of white, 18 percent of Black, 21 percent of Hispanic and 23 percent of Asian Americans.

So far, the political incentives around cryptocurrency are proving lopsided. More candidates have found reason to embrace a technology backed by legions of devoted users, a fresh crop of newly rich donors, and a growing number of lobbyists, than to vocally reject it.

Look, it just seems cool. Everybodys got a friend whos made some money on it. Theres a lobbyist who wants to take me to lunch, said Sherman, who has called for banning cryptocurrency outright, of the hype that has made it popular with his colleagues on the Hill. Shunning the technology, on the other hand, has brought the congressman few immediate rewards. In addition to facing a crypto-fueled primary challenge, he has inspired the creation of a new super PAC, Shut Down Sherman, dedicated to taking down Enemy Number 1 to Crypto.

Sherman bemoaned a lack of political interest in what he sees as the emerging threats from crypto, such as its potential to undermine U.S.-imposed financial sanctions and the U.S. dollars status as the global reserve currency.

That is worth hundreds of billions of dollars to American families, and theres no lobbyist in this city that protects it, he said. No lobbyist is fighting for the ability to go after criminals with sanctions.

Ron Hammond, director of government relations at the Blockchain Association and an advisor to the pro-crypto HODL PAC, said that rather than fielding concerns about crypto, he is more likely to receive requests for advice. Congressional staffers from both parties want help, he said, drafting pro-crypto tweets for their bosses, who see that the subject can generate frenzied social media engagement.

The website for the Congressional Blockchain Caucus, which was formed to foster the accounting technology underlying cryptocurrency, lists 18 Republican and 17 Democratic lawmakers. Sherman, though, is not alone in taking a hard line on the crypto boom.

Brock Pierce, a former child actor turned crypto entrepreneur, is exploring a run for the Vermont Senate seat being vacated by Democrat Patrick Leahy. | (Photo: Business Wire)

Massachusetts Sen. Elizabeth Warren has called for Congress to do more to regulate the industry. She is also among the Democrats calling for a crackdown on the carbon emissions associated with some cryptocurrencies, like Bitcoin, which relies on vast numbers of specialized computers competing to solve mathematical puzzles as part of an energy-intensive process that secures its network.

Hillary Clinton and Donald Trump have both spoken out against cryptocurrency on account of its potential to undermine the dollars global dominance.

In June, Trump likened Bitcoin to a scam, telling Fox Business Network, "The currency of this world should be the dollar. And I don't think we should have all of the Bitcoins of the world out there. I think they should regulate them very, very high."

Younger politicians are less likely to prioritize such concerns. I dont know a single Republican under the age of 50 whos critical of crypto, said Hammond, who previously worked for Republican Rep. Warren Davidson of Ohio. Hammond said that some older members of the party quietly oppose cryptocurrency adoption but have hesitated to express public opposition.

The technology has even split the Trump family along generational lines. Former first lady Melania Trump, 51, posted a tweet this month in honor of Bitcoins 13th birthday, as she launches her own line of non-fungible tokens, digital collectibles that rely on the same blockchain technology that enables cryptocurrencies.

While those who deal on the world stage are more likely to see crypto as a threat to the U.S.-led global financial order, many mayors like Eric Adams of New York and Francis Suarez of Miami have embraced crypto as a way to attract attention, and potentially jobs, to their cities.

The technology is also inspiring candidates who have made money from it to mount crypto-themed runs for office. In Oregons newly created 6th District, Matt West, a DeFi or decentralized finance, a new form of lending enabled by blockchain technology developer, is running as a pro-crypto Democrat. On the heels of a quixotic independent presidential bid, Brock Pierce, a former child actor turned crypto entrepreneur, is exploring a run for the Vermont Senate seat being vacated by Democrat Patrick Leahy.

As the total value of cryptocurrencies has exploded to more than $2 trillion in recent years, those made rich by the boom have begun to throw their weight around as donors, too. Last year, the second-largest individual donor to Joe Bidens presidential election efforts was Sam Bankman-Fried, the 29-year-old founder of cryptocurrency exchange FTX. Bankman-Fried gave more than $5 million but evinced little interest in scoring a meeting with the beneficiary of his largesse.

As Congress and the Biden administration begin to grapple in earnest with the implications of cryptocurrency on a range of policy fronts, crypto donors are becoming more strategic. On New Years Eve, Jesse Powell, the CEO of Kraken, another exchange, issued a public call for lists of candidates who support cryptocurrency and of crypto enemies. The next day, he announced he had made maximum allowable contributions to 15 politicians, including Rhodes, Mandel and West.

Sam Cooper, a former deputy chief of staff to pro-crypto Sen. Ted Cruz who now advises crypto clients in the private sector, said donors are still getting their bearings this cycle, before what he anticipates will be a more organized effort in the next presidential election.

By then, Cooper said he expects crypto will have gone from a niche issue to a campaign trail staple. Will Bitcoin become a core issue in 2022? No. Its going to be inflation and immigration and the things we see everyday, he said. But I do expect in 2024, especially on the Republican side, that this will be an issue.

Ben Schreckinger covers tech, finance and politics for POLITICO; he is an investor in cryptocurrency.

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Bitcoin crashes the midterms - POLITICO

A streamlined tax regime is pivotal to a clear, constructive and adaptive regulatory environment

Notwithstanding the eventual introduction of the Cryptocurrency and Regulation of Official Digital Currency Bill in Parliament, cryptocurrencies continue to proliferate. In fact, a liberal estimate suggests that as many as 10 crore Indians may already have investments exceeding a total of $10 million in them. This not only creates an avenue for generation of tax revenue for the nation but also puts forth a Herculean challenge for the tax authorities who have to track and tax transactions involving cryptocurrencies.

Although the Income Tax Act, 1961 (IT Act) does not specifically mention cryptocurrencies, it does cast a wide enough net to bring crypto transactions under its ambit. Trading in cryptocurrency may be classified as transfer of a capital asset, taxable under the head capital gains. However, if such cryptocurrencies are held as stock-in trade and the taxpayer is trading in them frequently, the same will attract tax under the head business income. Even if one argues that crypto transactions do not fall under the above heads, Section 56 of the IT Act shall come into play, making them taxable under the head Other sources of income.

However, this in itself is not sufficient in order to put in place a simple yet effective taxation regime for cryptocurrencies. Since cryptocurrencies are unlike any other asset class, stored and traded virtually, there are varied challenges which need to be addressed in order to streamline the process of taxing crypto transactions.

First, the absence of explicit tax provisions has led to uncertainty and varied interpretations being adopted in relation to mode of computation, applicable tax head and tax rates, loss and carry forward, etc. For instance, the head of income under which trading of self generated cryptocurrency (currencies which are created by mining, acquired by air drop, etc.) is to be taxed is unclear. If these are taxed under capital gains, what should be taken as the cost of acquisition for the purpose of computation? If the acquisition cost is to be taken as the fair market value of the said cryptocurrency as on date of generation, how does one arrive at this value? Since there is no consistency in the rates provided by the crypto-exchanges, it is difficult to arrive at a fair market value. Conversely, there are divergent views in the market treating such an income as business income or other sources of income, which are taxable at individual tax rate slabs (which may be higher than those applicable to capital gains). Similarly, when a person receives cryptocurrency as payment for rendering goods or services, how should one arrive at the value of the said currency and how should such a transaction be taxed?

Second, it is often tricky to identify the tax jurisdiction for crypto transactions as taxpayers may have engaged in multiple transfers across various countries and the cryptocurrencies may have been stored in online wallets, on servers outside India. In such cases, it becomes difficult to pinpoint which jurisdictions tax laws would become applicable and what kind of tax treatment would be effected especially in light of various nations having differing tax treatment for crypto assets including imposition of a general ban on them.

Third, the identities of taxpayers who transact with cryptocurrencies remain anonymous. Each crypto address comprises a string of alphanumeric characters and not the persons real identity, giving tax evaders a cloak of invisibility. Exploiting this, tax evaders have been using crypto transactions to park their black money abroad and fund criminal activities, terrorism, etc.

Fourth, the lack of third party information on crypto transactions makes it difficult to scrutinise and identify instances of tax evasion. One of the most efficient enforcement tools in the hands of Income Tax Department is CASS or computer aided scrutiny selection of assessments, where returns of taxpayers are selected inter alia based on information gathered from third party intermediaries such as banks. However, crypto-market intermediaries like the exchanges, wallet providers, network operators, miners, administrators are unregulated and collecting information from them is very difficult. Another consequence of this lack of information is that the tax authorities are left with hardly any tools to verify any crypto transactions which do get reported. They are instead forced to fully depend on the data provided by the taxpayers.

Fifth, even if the crypto-market intermediaries are regulated and follow Know Your Customer (KYC) norms, there remains a scenario, where physical cash or other goods/services may change hands in return for cryptocurrencies. Such transactions are hard to trace and only voluntary disclosures from the parties involved or a search/survey operation may reveal the tax evaders.

While the aforementioned challenges provide enough food for thought to policymakers, certain steps can be taken to provide a robust mechanism for taxing crypto transactions going forward.

To begin with, the income-tax laws pertaining to the crypto transactions need to be made clear by incorporating detailed statutory provisions. These could include provision of a definition for crypto assets for tax purposes and guidelines addressing the major taxable events and income forms associated with virtual currencies. This should be followed by extensive awareness generation among the taxpayers regarding the same.

The practice of having separate mandatory disclosure requirements in tax returns (as is the case in the United States) should be placed on the taxpayers as well as all the intermediaries involved, so that crypto transactions do not go unreported. Additionally, the existing international legal framework for exchange of information should be strengthened to enable collecting and sharing of information on crypto-transactions. This will go a long way in linking the digital profiles of cryptocurrency holders with their real identities.

Furthermore, the Government must impart training to its officers in blockchain technology. In this regard, it may be noted that the United Nations Office on Drugs and Crimes Cybercrime and Anti-Money Laundering Section (UNODC CMLS) has developed a unique cryptocurrency training module, which can aid in equipping tax officers with requisite understanding of the underlying technologies. Tax authorities should also equip themselves with the latest forensic software (such as Elliptic Forensics Software is being used by the USA Internal Revenue Service and GraphSense used in the European Union) which can analyse a high volume of crypto transactions at a time and raise red flags in cases of suspicious transactions.

It is certain that cryptocurrencies are here to stay. A streamlined tax regime will be essential in the formulation of a clear, constructive and adaptive regulatory environment for cryptocurrencies.

Aastha Suman is in the Indian Revenue Service, posted as Deputy Commissioner of Income Tax, Karnataka and Goa. Ishaan Sharma is in the Indian Railway Accounts Service, posted as Divisional Finance Manager, Bengaluru Division, South Western Railways. The views expressed are personal

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Taxing cryptocurrency transactions - The Hindu

As you attempt to strike it rich in the digital gold rush, make sure you know how to recognize various schemes that want to part you from your digital coins

The world seems to have gone crypto-mad. Digital currencies like bitcoin, Monero, Ethereum and Dogecoin are all over the internet. Their soaring value promises big wins for investors (before the coins prices plunge, that is). And the fortunes to be made by mining for virtual money have echoes of gold rushes in the 1800s. Or at least, thats what many, including a long list of scammers, will have you believe.

In reality, if youre interested in cryptocurrency today, youre quite possibly at a major risk for fraud. This is the new Wild West a lawless, unregulated world where bad actors often have the upper hand. But normal rules for fraud prevention apply here too. Everything you read online should be carefully scrutinized and fact-checked. Dont believe the hype and youll stand a great chance of staying safe.

Fraudsters are past masters at using current events and buzzy trends to trick their victims. And they dont come much more zeitgeist-y than cryptocurrency. Media stories and social media posts are partly to blame, creating a feedback loop that only adds to the hysteria over virtual currencies. The result? Between October 2020 and May 2021, Americans lost an estimated $80m (71m) to thousands of cryptocurrency scams, according to the FTC. In the UK, the figure is even higher: police claim that victims lost over 146m (172m) in the first nine months of 2021.

Why are scams on the rise? Because:

If you have virtual money safely stored in a cryptocurrency exchange, it may be at risk from hackers. On numerous occasions threat actors have successfully managed to extract funds from these businesses, sometimes making off with hundreds of millions. However, usually the breached companies will promise to recompense their blameless customers. Unfortunately, there are no such assurances for the victims of cryptocurrency fraud. Fall for a scam and you may be out-of-pocket for a lot of money.

It pays to understand what these scams look like. Here are some of the most common:

This is a type of investment scam where victims are tricked into investing in a non-existent company or a get rich quick scheme, which in fact is doing nothing but lining the pocket of the fraudster. Cryptocurrency is ideal for this as fraudsters are always inventing new, unspecified cutting edge technology to attract investors and generate larger virtual profits. Falsifying the data is easy when the currency is virtual anyway.

Scammers encourage investors to buy shares in little-known cryptocurrency companies, based on false information. The share price subsequently rises and the fraudster sells their own shares, making a tidy profit and leaving the victim with worthless stocks.

Scammers hijack celebrity social media accounts or create fake ones, and encourage followers to invest in fake schemes like the ones above. In one ploy, some $2m was lost to scammers who even name-dropped Elon Musk into a Bitcoin address in order to make the ruse more trustworthy.

Fraudsters send emails or post social media messages promising access to virtual cash stored in cryptocurrency exchanges. The only catch is the user must usually pay a small fee first. The exchange doesnt exist and their money is lost forever.

Cybercriminals spoof legitimate cryptocurrency apps and upload them to app stores. If you install one it could steal your personal and financial details or implant malware on your device. Others may trick users into paying for non-existent services, or try to steal logins for your cryptocurrency wallet.

Sometimes the scammers even manage to fool journalists, who republish fake information. This happened on two occasions when legitimate news sites wrote stories about big-name retailers preparing to accept certain cryptocurrencies. The fake press releases that these stories were based on were part of pump-and-dump schemes designed to make the fraudsters shares in the mentioned currencies more valuable.

Phishing is one of the most popular ways fraudsters operate. Emails, texts and social media messages are spoofed to appear as if sent from a legitimate, trusted source. Sometimes that source for example, a credit card provider, bank or government officialrequests payment for something in cryptocurrency. Theyll try to hurry you into acting without thinking.

The best weapon to fight fraud is incredulity. Unfortunately, we live in an age when not everything we read online is true. And quite a lot of it is explicitly crafted to trick and harm us. With that in mind, try the following to avoid getting scammed:

The world may have gone cryptocurrency-crazy. But you dont need to join in. Keep a cool head and ride out the hype.

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Cryptocurrency scams: What to know and how to protect yourself - We Live Security