Cryptocurrencies is the new digital money. These currencies are not treated like the paper and coin currency, as they are faster and more dependable. Cryptocurrency has the equal value as the coin and paper currency. Cryptocurrencies are mainly to eliminate the middleman, who are targeted like the banks as they store our money for us. Cryptocurrency is basically managing virtual money between two parties rather than having third party being involved like the bank to handle. Having cryptocurrencies that are connected to keep track of our transactions as well as manage, filter and sort. It can also manage our transactions for new business, help out with investments in startups, using something new (technology-wise) and eliminating fraud within transactions. Though, concerns/risks that are linked with crypto currencies towards using for business, it needs guidance from the IRS.
Using cryptocurrency have made the IRS focused on how buying or selling goods and services effect with taxation in the real-world. Cryptocurrency is convertible value, the conversion can go from cash to virtual currency and vice versa. This results the firms or investors to get authorized money to use around the world. According to IRS guidance, “In general, the sale or exchange of convertible virtual currency, or the use of convertible virtual currency to pay for goods or services in a real-world economy transaction, has tax consequences that may result in a tax liability” (IRS.gov). All the cryptocurrencies transactions which happens around the U.S. and many other countries are all events that are to be taxed. IRS has passed out the guidance in detail on reporting gains and losses of whoever uses cryptocurrency. Although, the currency is treated as property for tax commitments.
In my opinion, cryptocurrencies are somewhat an advantage for startup companies who needs to collect funds. The startup companies can include this form of payment of virtual currencies like bitcoin to attract customers, as bitcoin does have social impact. This will record every transaction where the company now has developed and stabilized.
Firms who adopt cryptocurrencies do have cybersecurity risks management. As hackers cannot be stopped from hacking in any given events or for example cryptocurrencies to hack from in the future. Though, to prevent such events to occur, we can provide and secure crypto currencies. Using such currency just gives the market a boost to do business with fast pace and cost. The market wants to adopt and increase the value of use within as its better in transferring.
I believe that crypto currencies are a way to get attention from the companies and firms around the world. The utilization of virtual currencies for investments and certain deals within the real-world seems unreasonable and unfair, the risk behind the investments are not mentioned. Few of the risks behind cryptocurrencies use are that it unrestricted and anonymous which can hurt someone in growing business. For example, if a company that has run itself for more than 30 years, now decides to move and adapt cryptocurrency the future can be at risk. This also puts the 30-year-old company at financial risk which cannot be separated from technology risks.
Having to use cryptocurrency within a company, which has to follow IRS guidance that shows the taxation and the interest owned towards the government should be paid in time. Managing risks also includes laundering of virtual money and protect from fraud, cryptocurrencies cannot guarantee every private key to be going towards the right customers. As it is unregulated, there is no guarantee that it is 100 percent not hackable by hackers. This makes cryptocurrencies a huge risk as the virtual money, it also converts into any currency which could be transferred into anybody’s account without any security or action taken. A news article from CNBC called ‘Cryptocurrency and taxes: What you need to know’ mentions, “Spending crypto is a tax event and may generate capital gains or losses, which can be short-term or long-term” (Villamena – CNBC). This article gives an idea on how the cryptocurrencies can be traded, exchanged, spent, converted, digitally airdropped and receive payments using conversion. Understanding the IRS guidance for overall cryptocurrency, firms who started to use crypto should pay taxes. These taxes are to be paid by the gains, which I believe the firms should as to prevent from paying higher amount of interests and be taxed double.
By the research I believe that cryptocurrencies are growing with the market and certain firms have adopted. These firms do know the risk digitally and financial within their environment. The goal for them is to prevent hackers from hacking into their systems. The IRS have also accepted the fact of the virtual currency being used for certain goods and services and has to be taxed on certain terms.