Most people probably think when they deposit money into a bank that they own the money. This is interesting to note because the public sentiment does not match up with reality. This is also particularly interesting because a lot of people in crypto are probably intending to "cash out" without realizing that when they do they are giving the ownership of their wealth to the bank. It is possible for instance to lose access to the money in your bank account under certain specific circumstances.
So remember the following:
- Once you cash out your crypto and withdraw into a bank account the money legally is owned by the bank and not the account holder.
- Statistically speaking, under most conditions and circumstances the owner of the account has control over the funds even if they do not legally own the funds.
- A personal bank account is not effective asset protection from a legal standpoint.
These will be important to remember for the US persons who decide to take profit in the current and upcoming bull run of Ethereum. It is also important to note that it will be a taxable event when you trade as well as when you withdraw if you don't trade. If you withdraw for instance from Coinbase then expect at some point Coinbase to alert you to the fact that you have to pay taxes. The exact strategy for how to go about this is something only an accountant can properly answer but the obvious point is the more crypto you spend (whether for goods and services or crypto to crypto) the more taxable events you generate.
Short term capital gains taxes in places like California are almost 50% and so it is borderline crazy to day trade crypto in California. A person might think they are getting some sort of big win with instant millionaire status only to find out they owe close to 50% in taxes due to federal and local capital gains taxes (you get taxed twice in most instances). Strategically speaking, for people in certain states under certain laws it may in fact make more sense to buy and hoard. If you do not spend any crypto on anything and simply hold it then you reduce the risk of IRS troubles and the risk of bank troubles. Risk management strategies in my opinion become increasingly important as the value (and price) of cryptocurrency increases.
The above post is not legal or financial advice. Speak with an accountant.
References
- https://www.forbes.com/sites/robertwood/2017/08/31/californias-13-3-tax-on-capital-gains-inspires-move-then-sell-tactics/#68c8980a2097
- http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm100915/debtext/100915-0002.htm
- https://www.pbs.org/newshour/economy/is-your-money-safe-at-the-bank-an-economist-says-no-and-withdraws-his
It is not a comfortable feeling to be told by over the phone, by your account manager, that the bank is under no obligation to give you back your money.
Further, if you withdraw large amounts from Coinbase, your bank may freeze your account pending investigation. Meaning they also notified the authorities.
I came across some older posts from a few years back about people saying their bank accounts were closed because of ACH transactions to Coinbase.
Of course, not everyone is going to look at this situation, or their own facts, with the same degree of concern. Some investors and businesses are may not be worried at all, and may assume that they have little risk of facing IRS problems.
The year 2017 increases the adoption and demand for cryptocracy operations; For this reason, it is accelerating the financial technology companies to offer these bank card platforms. These days we have more than 30 cryptocracy debit cards in circulation, but of course there are differences, such as different fees between some of them and different transactions between two crypto exchange rates.
Coinbase brings the first Bitcoin cash card to the market in 2015; Another big name in this area is TenX, which is about to integrate Bitcoin, Ethereum and Dash for payment over Visa and MasterCard networks. Monaco, Bitcoin and Ethereum is a popular name that supports expatriates and offers interbank exchange rates to users without paying additional marking fee. Ocash is the latest encryption memory with a debit card. @dana-edwards @mrsfox
This is the main problem with the banking system. Legally the banking institution owns everything and can do as they please. There's no regulation at all. Wallstreet is still a casino.
If you put your money in the bank you are losing money. With a 0.5% interest rate, the inflation is higher than the interest rate.
Resteemed!
That's why I either use crypto or cash on real paper to buy most of the stuff I need...
The faster the people will understand the better... USA is bankrupt.
big bubble
Thank you for pointing out that the banks own your money once you've given it to them. Most people do not know this. It's important to bring this to the attention of the public.
This is not an advise to be taken by the U S citizens, I do not remember the last time I deposited money into my account, because anytime it gets there, the money cease to be mine, and the bank can do what ever they want with it. This banks use our money to run several opportunities and get richer. The sooner people get to know this, the better.
I deposited money into my account, because anytime it gets there, the money cease to be mine, and the bank can do what ever they want with it.
Good posts. Thanks for share
@dana-edwards This is insane and scary. Taxation is essential and reasonable at around 2-5%, but 50%? This is absolute theft. Effective risk management strategies are needed.
Its unfortunate to be taxed from crypto to crypto. Wish it was only a Taxable situation when you go from crypto to USD
This is going to be a good read, thank you for the post!!
That's it, I just asked the question last year at my bank, and he was rather perplexed!
At first he could not tell me where to find the articles of banking law to find the written answer; Yet the person on the phone has just left the school benches ...
In fact, the bank is the custodian (and not the owner) of the assets of its clients. As a result, she has custody of it, a guard that is a service. This day care service is therefore a service billed to customers.
In France, the right of ownership automatically induces free disposal of the property for the owner.
And when a customer opens an account at the bank, this customer signs an account opening contract which is none other than a service.
Difficult for me to explain, not used to cut hair in four.
Naturally, as mentioned above in Durock, sometimes in very difficult situations the banker can not return the money to the accounts. Not long ago, in Greece, everyone rushed to the banks to make withdrawals. So there were restrictions for all Greeks.
And comes to mind a customer who, having no confidence in anyone, had his ingots at home ...
Reference
http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm100915/debtext/100915-0002.htm
Blockchain Technology has succeeded because it's decentralized and it gives us a lot of freedom.
If we were deposited our money in the bank, it means Blockchain gave us a gift, but we rejected this gift.
ENTRE COMILLA LO DE DESCENTRALIZADO,YA ESTA LOS GOBIERNOS DENTRO
fiat money is equity of society, it cant be taken back even if you want to
http://www.themoneyenigma.com/the-evolution-of-money-why-does-fiat-money-have-value/
It's seriously annoying how the government tries to control everything and makes you pay taxes for virtually anything. Basically, if you make a few good trades, you can still lose out more money, because of stupid high taxes. That is another reason to keep holding cryptos and wait for some sort of massive bank failures worldwide, lol...
Very interesting post on a topic that a lot of people seem to be overlooking. The fact that you may not actually own your money is definitely something that needs to be considered when one leaves a large (or any) sum of money sitting in an account.
The way that cryptocurrencies are taxed is also going to hit some people very hard, I imagine. I know that @jerrybanfield does a great post on how he pays taxes on what he earns on Steemit, which to me seems was very useful. You can read it here.
Personally, I think that paying taxes on cryptos is very important, as regulations are becoming tighter and tighter by the week - you don't want to be caught out by some mere red tape after spending so long building your wealth with cryptocurrencies. Having spoken to someone who works in the tax office in Ireland about this, I will definitely pay taxes on my earnings and on my capital gains.
Maybe I'm a little bit too by the book, but I would rather be safe with my earnings as opposed to get bitten by my mistakes in the future! I agree though, a good method is to accumulate cryptocurrencies and not cash out - if you can afford to do so! Personally, I hold most of my cryptocurrencies long term as I am waiting for mass adoption.
I saw how Jerry is paying his taxes but since he is not an accountant as far as I know, I do not decide to do it exactly as he is. What I can say is it is very complicated but the way I go about it is I calculate the taxes from Steem as income upon conversion to Bitcoin. So this happens typically at Bittrex and any gains or loses if there are any, I calculate using Cointracking or Bitcoin.tax. Maybe not the best system but I'd like to hear what everyone else is doing.
Even that might not be good enough. Frankly without some guidance and better tools we are just going to have to try our best and do what our accountants say.
I agree that it's not right to follow his method religiously, but after speaking to someone in the tax office I have combined it with my own method and think in doing it fine.
Your method seems pretty good too!
One interesting way which may be possible to reduce risk of IRS trouble on Steemit would be to simply select 100% Steem Power and not take any Steem Dollars. Even this might not actually de-risk the account holder but it's something I've seen discussed. For sure Steem Dollars are taxed, that much we know.
I think it is impossible to avoid mistakes in the current environment so it's a matter of being prepared to pay for any mistakes you do make. As long as they aren't huge mistakes then it's easier to deal with. The easiest way to limit mistakes is to limit activity which means don't trade, don't spend, and just hold.
I was thinking that too. That Steem is not really an actual assett according to any definition (legal or otherwise) of that term.
Well written. I've grasped gen concept of fractional lending, and that most money doesn't exist. So I'm getting into cryptos now as it seems a better option due to the decentralized nature and potential for wealth building. What strategies would you offer to a new crypto investor who is investing and holding numerous coins; what's not the best way to mobilize this wealth? Transferring to usd = taxed, and we have need of goods and services that don't accept cryptos. Any advice?
Why do you think this?
Resteemed, following :)
You hit the nail on the head with this post. As well, most people don't know that the bank fractional lends out your money, so if there is a run on a bank...they simply don't have the $
Banks certainly don't “own” the money deposited, which is why we fret about bank runs and bankruptcies.
When you make a deposit at a savings account, you've agreed to lend the money to the bank in exchange for an interest payment, however small that may be. The bank will then use your money to earn their spread, which is the difference between the interest rate they pay you and the interest rate they earn from the next borrower. Borrow at 0.01% and lend at 4.25%, for example.
It's a pretty sweet scheme if you think about it. A bank is legally licensed to make money with your money and the more you deposit the better. That why banks are always offering incentives for additional deposits to savings accounts. And, this helps to explain why banks are able to afford the nicest buildings of any business.
Checking accounts are another story as banks are required to keep those funds liquid for you to draw on at any time. They can shuffle around funds to meet your withdrawals, but they can't put all of it into higher interest yielding loans.
The taxes in California are totally crazy.
Americans clearly need to start reducing their government since its starting to affect their economic freedom, ironically America was funded to be the “land of the free”
Great post @dana-edwards. Fully upvoted through steemfollower
May I simply just say what a comfort to find someone who genuinely understands what they are discussing online.
You certainly know how to bring an issue to light and make it important. More and more people really need to check this out and understand this side of your story.
I can't believe you're not more popular because you surely have the gift.
Excellent blog post. I absolutely appreciate this post. Keep writing! Thankyou @dana-edwards
The Banks are the major culprits in looting public wealth. Your money you think is safe in bank but thats the most unsafe place. They can just tell you some day its over and you cant do a bit about it. In this day all the institutions who claim themselves as your trusted source are the ones you need to be most careful of
Smart contracts are deterministic exchange mechanisms controlled by digital means that can carry out the direct transaction of value between untrusted agents. They can be used to facilitate, verify, and enforce the negotiation or performance of economically-laden procedural instructions and potentially circumvent censorship, collusion, and counter-party risk. In Ethereum, smart contracts are treated as autonomous scripts or stateful decentralized applications that are stored in the Ethereum blockchain for later execution by the EVM. Instructions embedded in Ethereum contracts are paid for in ether (or more technically "gas") and can be implemented in a variety of Turing complete scripting languages.
"it is borderline crazy to day trade crypto in California."
Agreed! (Though I think day trading anything is crazy in general...)