Libra was invited to participate on a panel at the Blockchain and Virtual Currency Tax Issues Workshop in Washington DC hosted by Steptoe and Johnson. There were many great discussion topics, but a few stood out for us. Here are the key takeaways:
Companies building businesses in the cryptocurrency markets need to prepare for regulation – The cryptocurrency markets are breaking records, from Bitcoin reaching an all-time high of $5000 to ICO’s (initial coin offerings) setting new funding records. The takeaway is that the cryptocurrency markets are now too big to ignore and governments will accelerate policy, rules and enforcement actions. Companies building businesses in the cryptocurrency markets should be very proactive in terms of how they plan to respond when (not if) new regulations are passed.
Companies can be compliant while regulations are being developed – The US government has issued notices, such as the 2014 IRS ruling on virtual currency and the most recent SEC notice on ICOs, which offer indications of their thinking for future regulations. At the same time, there is a notion that the grey areas in current regulations lead some to claim it is impossible to be compliant, so they are taking no action to comply. We disagree with this approach. The takeaway is that the more prudent step is to try assess how the rules impact your business and then make best efforts to comply.
Overall, we recommend that companies start investing in operational and reporting capabilities for regulatory compliance purposes. Companies that show best efforts to comply – – even when rules are still somewhat grey – – not only reduce future enterprise risk, but also position themselves for growth as capital sources and potential clients begin to differentiate based on compliance policies.
In summary, we believe that companies that invest early in reporting solutions will be best positioned to both adopt the impending regulations as well as mitigate the risk of fines for non-compliance.
Libra has joined the Digital Asset Tax Policy Coalition to inform policy for cryptocurrency reporting. We will continue to share our insights as this industry evolves. Subscribe now to read about our latest findings.