The pulse of the cryptocurrency landscape 

By Peter Kwon, CPA 

It’s payday — time to go shopping! You fire up the laptop and log in to your online checking account at Silicon Valley Bank. You quickly realize that your funds are frozen and that you do not have access to any of your hard-earned money to pay the bills. Deficiencies in risk management and a lack of proactive supervision by executives caused a bank run to lead to the collapse of your financial institution. Not good. 

You are a startup and a small business owner who is always fighting to make ends meet. You finally get paid for your hard work only to get hit with service fees from online payment processors like PayPal or even your traditional bank. Payments from international clients are even more frustrating due to currency conversion fees. Further adding to frustration can be the delay in receiving customer payments that can sometimes take days in the traditional banking system. 

What if you could cut out the burdensome and fee-heavy intermediaries? In times of high costs and high inflation, can businesses leverage digital currency to improve their bottom line? Yes. Enter the world of digital assets.  

What is cryptocurrency? 

Cryptocurrency is digital currency that is verified and maintained by a decentralized blockchain. Payments can be made directly from person to person and are not controlled by any central authority such as a bank or the government, potentially reducing the risk of censorship or interference. All transactions are recorded on the blockchain, which is a secure and distributed ledger across participants and is available for anyone to see. The underlying technology that supports the blockchain provides a transparent and tamper-proof medium for which anybody with an internet connection can actively monitor and verify digital transactions. 

Although it has only existed since around 2008, I believe cryptocurrency has the staying power to improve the business world as we know it in so many positive ways — as long as there continues to be regulatory clarity and a supportive legal framework for mainstream adoption.  

Major NFT/cryptocurrency law changes for 2024 and beyond 

In March of 2022, President Biden issued Executive Order 14067, “Ensuring Responsible Development of Digital Assets,” with, among others, a directive for the U.S. government to “take strong steps to reduce the risks that digital assets could pose to consumers, investors, and business protections…” 

At press time, digital asset payments [cryptocurrency and non-fungible tokens (NFT)] received in excess of $10,000 will be subject to Form 8300 reporting requirements effective on Jan. 1, 2024. The prior iteration of this form only included cash payments, but new legislation, unless delayed or changed, now includes digital currencies and assets as a reporting requirement moving forward. Any trade or business that receives payment in excess of $10,000 from a customer, in a single or set of related transactions, must file a Form 8300 within 15 days of the first part of that transaction. The Form 8300 reporting requirements include name, SSN/ITIN, address, a verifying document (i.e., passport, DL, alien registration card, or some other official government document), and a description of the transaction that must be included with the amount of payment received.  

Please note that the Form 8300 still has not been revised to include these updated regulations as of this writing. We are still waiting to see whether this administrative change stays in place starting on Jan. 1, 2024, or if it will be further delayed. 

Proposed regulations 

Biden’s Infrastructure Investment and Jobs Act or “Infrastructure Bill,” which was passed in late 2021, included changes in which cryptocurrency exchanges such as Binance, KuCoin, and Coinbase would be required to issue a Form 1099-DA to users showing all cryptocurrency trading activity starting from January 2025. 

Also beginning in tax year 2025, brokers and trading platforms, payment processors, and wallet providers will also be required to report gross proceeds on a newly developed Form 1099-DA that should be similar to the customary Form 1099-B used for investments. In the first year, the reporting requirements will only include gross proceeds, passing the burden to the individual taxpayer to provide the detailed underlying data and actual gains or losses associated with those gross proceeds. Then, beginning on Jan. 1, 2026, the IRS will require these providers to report all known data to users including cost basis and net profits or losses from digital asset and cryptocurrency trading. 

Please note, similar to the current 1099-B forms provided by brokers, these forms will not be perfect and will likely contain a lot of errors. Currently, it is difficult to track the correct cost basis of an asset across wallets, platforms and exchanges. It is unlikely that these providers will have the applicable tools to provide the most accurate information when these reporting requirements go into effect. 

Final thoughts 

As cryptocurrency continues to garner more attention and popularity, it is likely that accountants will see more clients with digital asset exposure and activity on their books and should prepare themselves accordingly by becoming more proficient in blockchain technology. With the recent news that BlackRock has filed for both Ethereum and Bitcoin ETFs, it appears that major financial institutions are poised to expand their presence in the digital currency and asset world. That means, coupled with advancements in the scalability and efficiencies of cryptocurrency features, I expect to see enhancements in the long-term viability of cryptocurrency usage. Further, with factors such as economic instability, efficiencies in transaction fees, and inflation and currency devaluation, there could be an increased interest and adoption in cryptocurrency as an alternative store of value, which could then potentially lead to more price stability. 

However, despite its potential, it is important that people continue to educate themselves and always proceed with an extra level of caution to minimize risk when engaging in cryptocurrency-related activity.  

Peter Kwon, CPA, is cofounder of RMPK Accounting, LLC, an accounting firm headquartered in the greater Washington, D.C., area. RMPK Accounting, LLC, specializes in serving high-net-worth individuals and small business owners with bookkeeping, tax planning, and tax consulting with a primary focus on cryptocurrency and NFT-related clients. Peter sits on the VSCPA Young Professionals Advisory Council. He holds Bitcoin and Ethereum, and enjoys buying and selling NFTs on OpenSea, an NFT marketplace. The opinions expressed here are his own, are not those of his firm or clients, and should not be interpreted as financial advice.  

Email: [email protected] 
Website: https://www.rmpkaccounting.com/  
LinkedIn: https://www.linkedin.com/in/peter-kwon-cpa-67605161/