IRS Crackdown; Tracking Bitcoiners with Chainalysis

[EE_]

3 days ago |

IRS Crackdown; Tracking Bitcoiners with Chainalysis

According to a contract recently obtained by the Daily Beast, the IRS can now track bitcoin and other cryptocurrency addresses. They can do this to route out potential tax evaders. They purchased software from the blockchain analysis group Chainalysis.

IRS Crackdown; Tracking Bitcoiners with Chainalysis

The document details that “criminals” have used digital currencies to launder money, deal drugs, and commit other unlawful behavior. However, criminals have also been using digital currencies to ignore tax liabilities and evade responsibility. The Daily Beast article elaborated:

The document highlights how law enforcement isn’t only concerned with criminals accumulating bitcoin from selling drugs or hacking targets, but also those who use the currency to hide wealth or avoid paying taxes.

Reason for IRS Crackdown; Tracking Bitcoiners

The reason the IRS is cracking down on digital currencies appears to be because only 802 people declared bitcoin profits or losses in 2015. The Daily Beast article suggests that many people may have not expected the IRS to collect on digital currencies. Others may have just thought they could easily sidestep this alleged obligation.

As a result of this failure to pay taxes, the IRS consulted with Chainalysis. They are now providing the IRS with tools to track bitcoin addresses through the blockchain and centralized exchanges. A Fortune article captured a screen shot of the letter:

IRS Possesses Software Used For Discovering Bitcoin-Wielding Tax Evaders

The tool that Chainaylsis gave the IRS is called a refactor tool. It visualizes, tracks, and analysis transactions on the blockchain. Agencies from law enforcement, IRS, and banks will be able to use the tool, according to sources. To date, records show the IRS has paid Chainaylsis $88,700 since 2015 for its services.

Tax Evaders and “Criminals” are Adapting; Coinbase Case

IRS Possesses Software Used For Discovering Bitcoin-Wielding Tax Evaders
Chainalysis

Even though the IRS and companies such as Chainalysis are starting to hunt down blockchain users for evading taxes, enterprising individuals are adapting. They are now starting to use blockchains and cryptocurrencies that undermine current analytic techniques. For instance, the Wannacry hacker group supposedly moved their funds over into Monero to evade detection by law enforcement. Other crypto users may decide to use Zcash, which also employs more private and anonymous transaction measures.

In the past, the IRS has used multiple outlets to capture tax evaders using bitcoin. They have already tried to legally force Coinbase to hand over customer information. Currently, it looks like Coinbase may surrender customer data for those who exchanged over $20,000 worth of bitcoin on the platform. No telling what the court will rule in the end. News.Bitcoin.com covered the case in June:

The IRS will no longer target a wide-range of Coinbase users via its information request, which it filed on Coinbase back in March. Instead, the agency made concessions to seek account data of individuals who transacted — meaning they bought, sold, sent, or received — $20,000 worth of bitcoin in any transaction type.

Images via Shutterstock, bistatebusinesscenter.com, and Chainalysis

https://news.bitcoin.com/irs-crackdown-tracking-bitcoiners-with-chainalysis/

[madfranks]

the IRS can now track bitcoin and other cryptocurrency addresses. They can do this to route out potential tax evaders. They purchased software from the blockchain analysis group Chainalysis.Only if you're sloppy with your wallet. Anyone here can download the bitcoin client and create a brand new wallet number out of thin air, with absolutely ZERO information linking the wallet to you. You don't need to register a name, SS #, phone number, address, or anything; you can simply generate a new wallet and it can't be linked to anyone. Then you either mine coins or buy them from any number of sources where you don't have to use a bank. It's not possible to trace such transactions to any one individual. Only when certain entry/exit wallets are linked to accounts where the IRS can they track you.

[madfranks]

the IRS can now track bitcoin and other cryptocurrency addresses.Actually, anyone can track bitcoin addresses, it's all public. Go to this site and you can personally track any address you want: blockchain.info

[Hitch]

Then you either mine coins or buy them from any number of sources where you don't have to use a bank.

What sources do not have a direct link to you? This is where they get you. The wallet itself can't be tracked to you, how you 'feed' the wallet can though. Don't worry. .Gov is on the job, tax funded, to bleed the bitcoin community anyway they can, and catch some perps in the process. Some awards and bonuses are waiting for which hero's succeed.

[ShortJohnSilver]

I have mined a few coins' worth of Monero (symbol is XMR) because they have a very strong privacy mechanism that makes it very difficult to track their blockchain. I was mining and breaking even at $45 , in the last few days it jumped to $120+ due to a popular exchange in Korea, adding them.

[crimethink]

Only if you're sloppy with your wallet. Anyone here can download the bitcoin client and create a brand new wallet number out of thin air, with absolutely ZERO information linking the wallet to you. You don't need to register a name, SS #, phone number, address, or anything; you can simply generate a new wallet and it can't be linked to anyone. Then you either mine coins or buy them from any number of sources where you don't have to use a bank. It's not possible to trace such transactions to any one individual. Only when certain entry/exit wallets are linked to accounts where the IRS can they track you.

Is it possible the device/computer used to access the specific blockchain ID will betray you to the regime? For example, the computer relays covertly the motherboard/machine ID and your Bitcoin wallet?

The only way to (possibly) avoid this would be to buy a laptop in a distant location away from your home, with cash, and then 1) never use it for any personally-identifiable action and 2) always connect to public WiFi. But one single slip-up, say, sending an email to a friend, and that anonymity is over.

[expat4ever]

I thought with btc I could just get on any cpu and access my wallet? Just because someone came to my house to use their wallet doesn't mean I avoided taxes.

[crimethink]

I thought with btc I could just get on any cpu and access my wallet? Just because someone came to my house to use their wallet doesn't mean I avoided taxes.

The IRS doesn't care. It's on you to "prove" you are "in compliance." Just like with a pile of cash; it's on you to "prove" that it's not "proceeds of crime," and therefore subject to Highway Robbe...uh, "civil asset forfeiture."

[cheka.]

frbny and its army of minions, paid for by their magic money machine, will unleash whatever it takes to force people into their pen - whether it's frn or a digital scheme they control. how many countries/wars/assassinations/coups/bank collapses/currencies/revolutions can we cite for proof? scads

they are on a long LONG winning streak. and this one they can fight with a bagle in their left hand, puter mouse in their right hand. talk about a lock -- fade the indy currencies with both hands

[Ares]

frbny and its army of minions, paid for by their magic money machine, will unleash whatever it takes to force people into their pen - whether it's frn or a digital scheme they control. how many countries/wars/assassinations/coups/bank collapses/currencies/revolutions can we cite for proof? scads

they are on a long LONG winning streak. and this one they can fight with a bagle in their left hand, puter mouse in their right hand. talk about a lock -- fade the indy currencies with both hands

Oh there is no doubt they will fight. Just look at the Liberty Dollar, Bernard von NotHaus created a currency backed by gold. FBI and Secret service stormed the place, closed it down and locked up Bernard under a bullshit law for making a currency that resembled Federal Reserve Notes. If you looked a Liberty Dollar, they didn't resembled a FRN.

But that doesn't stop the (((chosen ones))) from shutting it down.

[Joshua01]

BitCoin has been assimilated. It's too late

[AndreaGail]

Interesting! The thought had always crossed my mind as big brother technology becomes better and the prices Of cryptos rose to make it a lucrative market for the IRS to go after

In theory, with bitcoins market cap currently at 72 billion, and if the holder doesn't have good records proving their cost basis (and the IRS assuming a zero basis), the IRS could be looking at billions of untaxed gains plus penalties, interest etc assuming most didn't report their income

[Ares]

Interesting! The thought had always crossed my mind as big brother technology becomes better and the prices Of cryptos rose to make it a lucrative market for the IRS to go after

In theory, with bitcoins market cap currently at 72 billion, and if the holder doesn't have good records proving their cost basis (and the IRS assuming a zero basis), the IRS could be looking at billions of untaxed gains plus penalties, interest etc assuming most didn't report their income

Thats if you cash out. Do not convert your crypto holdings to cash and there is no gain or loss. If you can pay for products or services directly you can completely side step their taxing ability.

[EE_]

Good for bitcoin?

Bernanke Flip-Flops: Will Be Keynote Speaker At Blockchain Conference
by Tyler Durden
Aug 27, 2017 2:30 PM


Echoing his predecessor Greenspan's shift to the 'dark side' (fully supportive of a gold standard after leaving office), former Fed Chair Bernanke now appears to be full-heartedly supportive of cryptocurrencies having warned in 2015 of "serious problems" with bitcoin due to its "instability" and "anonymity."

As CoinTelegraph reports, in an interesting turn of events, former chairman of the Federal Reserve Ben Bernanke, will be the keynote speaker at a Blockchain and banking conference in October hosted by Ripple.

Bernanke is an interesting call for the keynote speaker as he has criticized cryptocurrencies in the past... (via Qz.com)

Bitcoin's interesting from a technological point of view. We’re in a world where the payments system is evolving quickly and new approaches to managing payments are proliferating, and some of the ideas around bitcoin will no doubt be useful in doing that.

But I think bitcoin itself has some serious problems. The first is that it hasn’t shown to be a stable source of value. Its price has been highly volatile and it hasn’t yet established itself as a widely accepted transactions medium.

But the real serious problem that it has is it’s anonymity, which is a feature, and is also a bug, in that it has become in some cases a vehicle for illicit transactions, drug selling or terrorist financing or whatever. And you know, governments are not happy to let that activity happen, so I suspect that there will be oversight of transactions done in bitcoin or similar currencies and that will reduce the appeal.

But flip-flopping former Fed Chairs is nothing new once they leave office...

The gold standard was operating at its peak in the late 19th and early 20th centuries, a period of extraordinary global prosperity, characterised by firming productivity growth and very little inflation.

But today, there is a widespread view that the 19th century gold standard didn’t work. I think that’s like wearing the wrong size shoes and saying the shoes are uncomfortable! It wasn’t the gold standard that failed; it was politics. World War I disabled the fixed exchange rate parities and no country wanted to be exposed to the humiliation of having a lesser exchange rate against the US dollar than it enjoyed in 1913.

Britain, for example, chose to return to the gold standard in 1925 at the same exchange rate it had in 1913 relative to the US dollar (US$4.86 per pound sterling). That was a monumental error by Winston Churchill, then Chancellor of the Exchequer. It induced a severe deflation for Britain in the late 1920s, and the Bank of England had to default in 1931. It wasn’t the gold standard that wasn’t functioning; it was these pre-war parities that didn’t work. All wanted to return to pre-war exchange rate parities, which, given the different degree of war and economic destruction from country to country, rendered this desire, in general, wholly unrealistic.

Today, going back on to the gold standard would be perceived as an act of desperation. But if the gold standard were in place today we would not have reached the situation in which we now find ourselves. We cannot afford to spend on infrastructure in the way that we should. The US sorely needs it, and it would pay for itself eventually in the form of a better economic environment (infrastructure). But few of such benefits would be reflected in private cash flow to repay debt. Much such infrastructure would have to be funded with government debt. We are already in danger of seeing the ratio of federal debt to GDP edging toward triple digits. We would never have reached this position of extreme indebtedness were we on the gold standard, because the gold standard is a way of ensuring that fiscal policy never gets out of line.

Bernanke represents another major player in the world of traditional money and investing who is now a champion of digital currencies.

http://www.zerohedge.com/news/2017-08-27/bernanke-flip-flops-will-be-keynote-speaker-blockchain-conference