IRS Proposes Strict New Bitcoin Rules

Plus: Bitcoin Dominance Above 96%, Microstrategy $745M Profit

Author

Colin Aulds
October 26, 2023

Today we’re covering:

  • IRS proposes new, hard to follow rules for Bitcoin transactions,

  • Bitcoin setting new records, left and right,

  • 76% of all USA BTC transactions are institutional,

  • And everything else you need to know.

—Colin

First time reading? I’m Jordan, and this is the Bitcoin Minimalist. Every day, our team scours dozens of sources to bring you need-to-know Bitcoin news and insights—all in 5 minutes. Were you forwarded this email? Sign up here.

INSTITUTIONAL ADOPTION

76% of North American Bitcoin Transactions are Institutional - Chainalysis Reports

The Scoop: According to a new report from Chainalysis called 2023 Geography of Cryptocurrency Report, financial institutions shape the North American Bitcoin market, influencing 76.9% of transactions.

Market Dynamics: Despite the overarching dominance of institutions, the last year has seen challenges, such as the FTX fallout in November 2022. Yet, by June, on-chain Bitcoin activity showed signs of revival, suggesting resilience in the market.

Stablecoin Impact on Bitcoin: Stablecoin usage in North America has seen a dip from 70.3% to 48.8% between February and June 2023. This shift could have repercussions on the broader Bitcoin market due to intertwined ecosystems.

Bitcoin Regulation on the Horizon: The U.S. faces the challenge of creating robust regulations specifically for Bitcoin. While there are obstacles, such regulations are crucial for ensuring a stable and growing Bitcoin market in the region.

WHAT WE'RE WATCHING

🛢️ PetroChina has finalized the world's first international crude oil transaction using China's digital currency, the e-CNY. CCP officials claim e-CNY transactions will have reached $250 billion by the end of June 2024 - though I would be very skeptical of those numbers.

🎢 On Monday, BlackRock’s iShares Bitcoin Trust ETF was added to the Depository Trust & Clearing Corporation list of tickers. Then, later that day it was removed, only for the DTCC website to go down shortly after. Then on Tuesday, it was added back yet again.

💪 A truly incredible statistic was reported by Dylan LeClair via twitter. “At today’s price, dollar cost averaging bitcoin has you in the green no matter what date you started buying.” Check out the cool visual in the tweet if you have a chance.

🔗 Tether announced plans to release real-time data on its reserves in the future, although no specific deadline is set. This comes after a recent leadership change with Paolo Ardoino taking over as CEO.

🌅 BlockFi announced that the company has emerged from bankruptcy as of October 24, 2023. This does not mean they will continue business. This simply means they will now begin paying out customers and winding down the company.

IRS

IRS Proposes New Rules for Bitcoin Transactions; Seeks Public Comment

The Scoop: The IRS is proposing new regulations on Bitcoin activity that would likely stifle innovation and make tax compliance for both businesses and individuals prohibitively expensive.

What It Means: The new rules redefine "brokers" to include nearly anyone involved in Bitcoin transactions…even potentially block explorers. Another consequence is that if you buy anything with Bitcoin, you might be required to KYC yourself to the merchant.

What's At Stake: This change could flood the tax system with a major increase in tax forms, leading to potential mistakes and extra audits. On top of that, because the rules are so hard to comply with, we can expect to see many businesses drop support for Bitcoin and/or leave the country for friendlier governments.

Currently there are around 8,000 comments. The more comments the community submits, the more likely it is that the implementation of any of these rules will be delayed or cancelled entirely! The best way to leave a comment is to use this comment writing tool utilizing ChatGPT.

POLL

Do you think the new IRS rules will happen?

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THURSDAY’S POLL RESULTS

Will California's BitLicense Be Any Better than New York's?

Yes - 33%

No - 67%

👍 Yes: “How could it be worse?” - Jeremy

👎 No: “It’s California…the only state that is as bad as New York when regulating anything. I am not optimistic.” - Hung

IN THE LOOP

🇨🇳 Pan Gongsheng, the new head of the People’s Bank of China, announced a strict crackdown on cryptocurrency transactions, as he attempts to implement macroeconomic controls and avert a national financial crises stemming from the country’s ailing housing market.

🤨 SEC Commissioner Hester Peirce stated on a Monday afternoon episode of CNBC’s Squawk Box that the “logic for why we haven't approved a Spot Bitcoin ETF has always mystified me.” This comment flies in the face of SEC Chairperson Gary Gensler’s long-time fight against approving such an ETF.

📖 Elon Musk offers Wikipedia $1B to change their name to ‘Dikipedia’. This is, as Musk says, “In the interests of accuracy”.

📉 The SEC has charged BlackRock Advisors for inaccurately describing their investments in the entertainment sector, particularly with the Aviron Group. To resolve the issue, BlackRock agreed to a $2.5 million settlement. This will likely have no bearing on their Bitcoin ETF application.

🚀 Many new records and high’s this week!

Today’s newsletter was written by Colin and edited by Jordan.