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Virtual, digital currencies seem to have some staying power. Bitcoin is now at its highest value ever, $1250 per coin, and still growing -- despite the SEC's rejection of a Winklevoss-backed exchange-traded fund for Bitcoin. And while Bitcoin grows, so too do other cryptocurrencies, like Ethereum.
With so much cyrptocoin flowing, the tax man will soon come knocking. And when he does, Steptoe & Johnson want to be there to influence the outcome. The firm announced last week that it will be forming the Digital Assets Tax Policy Coalition, alongside industry partners, in order to "help develop effective and efficient tax policies for the growing virtual currency markets."
Virtual Currencies, Real Tax Implications
The coalition will be led by the Chamber of Digital Commerce and include industry participants from digital currency exchanges, wallet providers, and transaction processing companies, according to a release from Steptoe. The firm will act as the coalition's counsel.
The move comes after the Treasury Inspector General for Tax Administration recommended that the IRS develop a coordinated plan for addressing virtual currencies. In 2014, released guidance stating that virtual currencies were to be treated as property, not currency. But a TIGTA audit last year found that, since that guidance, "there has been little evidence of coordination" to ensure tax compliance with virtual currencies and no action taken in response to public feedback. TIGTA recommended a new, coordinated strategy, updated guidance, and revised third-party information reporting tools.
"It is imperative that the IRS ensures that those who engage in activities using virtual currencies comply with all of their tax obligations," said J. Russell George, Treasury Inspector General for Tax Administration, said in November.
Steptoe Takes Another Step Towards the Center of the Virtual Currency World
The new coalition will seek to influence the IRS's efforts in a way that "works for both the industry and government."
"Tax solutions that allow the IRS to do its job without resorting to actions such as a John Doe summons will be of benefit to all, according to Jason Weinstein, co-chair of Steptoe's digital currency practice.
In November, the IRS served a summons against Coinbase, an online virtual currency exchange, seeking information on its customers. The new coalition may challenge such actions in the future, with Steptoe at the helm.
This isn't the first time Steptoe has jumped into the world of digital currency advocacy, either. The firm opened its blockchain and digital currency practice last summer. The firm is also counsel to the Blockchain Alliance, another program formed by the Chamber of Digital Commerce.