Easier to trade, no issues with tax&bank issues, and a lot of crypto exchanges charge to convert from crypto -> cash, whereas crypto -> crypto(stablecoin) is usually just exchange fees, less than the USD charge.
Sure about that bit? This may be the perception – that holding your assets in 'the crypto system' avoids tax issues – but the taxman will disagree.
Swapping $BTC for $USDC or whatever your tether of choice is is a 'taxable event'. You've sold one security in exchange for another. It doesn't matter that they're both crypto.
Now, it might be harder for the taxman to detect this event, which is a different thing.
In my country it is not taxable, only exchange to fiat currency is. (and this is explicitly mentioned).
If you wait you loose tax returns for the amount you invested in crypto (with each year you have it halved). Basically this is the same as in case of stock market. You don't pay taxes until you sell stock. And here stock is whole crypto market.
> I use these to buy some crypto-currency. 6 months later, I sell the crypto-currency for USDC, making a 10% profit. I
In every tax jurisdiction I know of in the world, this is a taxable transaction.
edit: I see you're asking the same question as me! Sorry!
So, you buy 100 USDC for $100 - you report that in your tax information (for use in following years tax deduction).
Then some time ago, you sell 110 USDC for $120, you pay tax for the amount $120 - $100 (unless the $100 was used year earlier, then you can use just $50 as a cost).
If you didn't report any costs (meaning buying crypto) you pay tax for the whole $120 amount.
No, each coin is equivalent to a stock. A transaction involving swapping one coin to another is a taxable event in every country I'm aware of.
Example for Poland: http://lexplorers.pl/en/polish-taxation-rules-virtual-curren...
German law is even better, you don't pay any tax for selling digital currencies if you hold it for at least a year.
> German law is even better, you don't pay any tax for selling digital currencies if you hold it for at least a year.
That's absolutely not the case - gains are treated as income if held over a year, not tax free. Coinbase has a really solid article on it [0]
[0] https://help.coinbase.com/en/coinbase/taxes-reports-and-fina...
As for Poland see Google translate page of official guidance from goverment: https://www-podatki-gov-pl.translate.goog/pit/rozliczenie-ze...
I poked around on Google and it looks like it is similar to France where crypto swap is also not taxable. (but I don't pay taxes there so it might be more complicated).
Cashing out meaning "selling crypto for fiat"?
What about if you sell BTC for another crypto or for gold or ...
So it seems from the outside that stablecoins exist primarily to take advantage of grey areas in taxation legislation - and possibly also KYC/AML legislation - which allow investors in certain jurisdictions to avoid taxable events which would otherwise occur when trading.
Building a business model on dodging taxes isn't a great look, is it?
Example:
Sweden taxes your gains when you transact a cryptocurrency holding, also when you exchange from one cryptocurrency to another. [1]
Same for Denmark [2].
Check your relevant tax legislation for your local rules.
[1] https://skatteverket.se/privat/skatter/vardepapper/andratill...
I might be wrong, but I believe the IRS views every transaction as a taxable event. Crypto -> crypto included.
Which country are you talking about here?
You have 1 share of Stock A and I have 1 share of Stock B. We both paid 1 USD for each of our different stocks.
Now I want Stock A and you want Stock B, so we'll trade with each other, and lucky us, both stocks are now valued at 2 USD per share.
After performing this trade, ask yourself these questions (from my perspective, or swap A and B for yours, it's the same either way):
* Have I held Stock B?
* What did I pay for Stock B?
* Do I now hold Stock B?
* Why not?
* What did I sell it for?
* And how much was that valued?
* So then how much did I gain?
* How much is owed in tax?
Unless your local tax law specifies "cashing out" not only as a taxable event, but the only taxable event, which I assure you it does not for stocks, the correct answers are as below. The equivalent to what you seem to describe for crypto would be transferring money in and out of the exchange where you trade stocks, and it would be ludicrous if this was the taxable event, which it isn't - but this is a common misconception among amateur crypto traders.
* I did hold 1 Stock B.
* I paid 1 USD for it.
* I don't hold it anymore.
* My dog did not eat it, so I must have sold it, which I did.
* I sold it for 1 Stock A and it was valued at 2 USD at the time of the transaction.
* 1 USD of value was gained at the time I sold from the time I bought.
* I owe a percentage of the 1 USD of value gained, depending on the capital gains tax rate, which differs.
I'd ask the local tax office anonymously. Not knowing doesn't fly as an excuse, everyone says that and it doesn't matter if it's true. Where is this place, if you don't mind?
Bonus question, what if we trade 1 DOGE for 1 Stock C? Is that different? What about 1 DOGE for 1 USD? What about 1 DOGE for 1 token backed by 1 USD? What about 1 Stock C for 1 token backed by 1 USD? Somehow it seems to get more complicated with "cashing out" laws, not less. Also I don't believe they exist, but I'd like to know too if they do anywhere.
That conversion is the sale of property. The IRS doesn't care whether you receive payment for your BTC in DOGE, USD, or corn futures; you divested funds from BTC, and the difference between what the BTC was worth at the time of acquisition VS sale is a capital gain or loss.
There are many true horror stories of amateur traders going from in the green to losing more than they own. I don't know any place where what you describe is legal.
If this is your strategy (as in method to cheat with taxes) now is probably a good time to calculate how much you owe and put that aside into something less volatile, not to accidentally ruin your life.
I wonder how many other jokers are accidentally conducting life-ruining levels of tax fraud.
https://www.ato.gov.au/General/Other-languages/In-detail/Inf...
But be careful! Actually read what your local tax office puts out. Assume nothing: it can be very easy to get yourself in to trouble.
For example:
- You buy BTC @ $1
- You exchange BTC @ $11 for $RANDOM
- You just made $10 :-) and you owe the taxman ~$3 (if you're in Australia)
- $RANDOM falls to ~$0
- So you didn't actually make a material profit
- But you still owe the taxman $3! (though you might be able to claim some sort of offset on your material loss of $RANDOM; IANAA)
- Now multiply all amounts by 10,000 and be sad
It's analogous to selling any asset. You buy gold, you sell gold at a profit and buy silver. You owe tax on the sale of the gold; you assume you'll pay this from the value you now hold in silver. The price of silver plummets. You still owe the tax on the sale of the gold.
From what I understand, you have to actually realize your losses/gains if you want to claim tax on them. So if $RANDOM drops to ~$0 then you can't use it for capital losses until you trade it to another crypto (or cash). You could probably just trade $RANDOM to something else and then back to realize the losses.
As another Australian you should really speak to an accountant if you ain't going to claim that massive loss because this is either comically wrong or intentionally misleading advice.
It's just like any other capital gains event and very simple to grok.
But who is doing it? What is the use case?
I almost typed audit-like. But I remembered they've pulled that shit before. "Attestations of balances" mean fuck-all when even back when they were denying the links between Bitfinex and Tether, the same people were countersigning loans between the two for both parties.
Oh, they did claim that they had had an audit done. But they couldn't release it to the public "because it was in Mandarin".
I very very very much doubt that 11-12% cash is in anyone's hand.
Tether isn't the only stablecoin. USDC, GUSD, DAI, LUSD, etc all have either attestations / audit reports (that are actually legitimate) or are overcollateralized with assets that can be seen on chain.
[1] https://triple-a.io/crypto-ownership/
[2] https://fortunly.com/statistics/cryptocurrency-statistics/#g...