Blockchain Week In Review

United States

IRS offers Tennessee couple tax refund over unsold staking rewards

Last week, in a closely watched federal court case in the U.S. District Court for the Middle District of Tennessee, the IRS offered a taxpayer who had paid tax on staking rewards a refund, but the taxpayer has reportedly rejected the offer.

The plaintiff, Joshua Jarrett, obtained certain cryptocurrency tokens by staking in 2019 and paid taxes on 8,876 tokens within the Tezos blockchain. “Staking” is a way of earning rewards for holding certain cryptocurrencies. It is a process of actively participating in transaction validation (similar to mining), and by verifying transactions in a blockchain network, the staker can earn passive income. Jarrett staked the 8,000 tokens and did not sell them through 2020. After paying income taxes on the tokens he staked, he sought a refund from the IRS, but the agency declined his request. Jarrett then decided to pursue his case in federal court, filing a complaint on May 26, 2021. The question before the district court was whether the receipt of staking rewards generates taxable income at the date the rewards are received. Jarrett argued that the government didn’t have the right to tax tokens he staked before the tokens were sold or exchanged. In court filings, Jarrett analogized his position to that of a baker who bakes a cake or an author who writes a novel before the baker or the author actually sells their creations.

On February 3rd, it was reported that the IRS offered to refund Jarrett’s money for the taxes paid on the staking rewards, but Jarrett rejected the offer. Unless a judge finally rules on whether tokens obtained in staking constitute taxable income, the matter may remain unsolved for other stakers in the future. Although a judicial opinion in this case may provide some much-needed clarity for stakers, the case could take years to litigate and is only binding precedent for taxpayers in the Middle District of Tennessee.

A trial is set for March 2023. The case is Jarrett v. United States, Case No. 3:21-cv-00419 (M.D. Tenn.).

Recent letters exchanged between Jarret’s counsel and the IRS can be found here.

The complaint can be read here.Continue Reading Blockchain Week in Review: Week of February 11, 2022

Weekly Fintech Focus

  • U.S. Congress to Hold Oversight Hearing on the Mining of Cryptocurrency
  • NY DFS to Hire New Deputy Superintendent
  • Recent Federal Regulator Announcements Signal Changes in Senior Leadership at the SEC, CFTC, and FDIC
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  • Australian Open Offers NFT Sales Alongside 2022 Tournament
  • ESMA Releases Request for Evidence Regarding Regulation on Distributed Ledger Technology

Continue Reading Virtual Currency Legal Report: Week of January 7, 2022

Weekly Blockchain Focus

  • Senate Holds Hearing on Stablecoins
  • Senate Confirms New Commodities Futures Trading Commission Chair
  • U.S. National Credit Union Administration Clarifies Ability of Federally Insured Credit Unions to Partner With Third-Party Digital Asset Service Providers
  • IRS Revises Language on Form 1040
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  • Chinese Court Declares Mining Contract Void

Continue Reading Blockchain Legal Report: Week of December 17, 2021

Weekly Blockchain Focus

  • Securities and Exchange Commission announces judgments entered against BitConnect’s lead national promoter
  • Commissioner Stump calls for clarity before bringing any more enforcement actions
  • Cryptocurrency CEOs speak to the House Committee on Financial Services
  • Gibraltar to use blockchain for digital identification
  • India to ban cryptocurrencies as a form of payment
  • Bank for International Settlements discusses decentralized finance in its quarterly report

Continue Reading Blockchain Week in Review: Week of December 10, 2021

Week in Review

  • Federal Jury says crypto-mining products are not securities
  • Biden Working Group recommends regulating Stablecoin issuers like banks
  • Historic Bitcoin trial over self-proclaimed “Satoshi” kicks off
  • Mayors taking their paychecks in bitcoin
  • Ant Group, Tencent, sign NFT Self-Regulation Convention
  • South Africa bans pension funds from investing in crypto
  • Australian Bank goes all-in on crypto
  • Kazakhstan limits crypto investments for retail traders

Continue Reading Blockchain Week In Review: Week Of November 5, 2021

  • Unamended Infrastructure Bill with “Broker” Reporting Requirements Set for Vote in September
  • CFTC Provides Clarification on Its Regulatory and Enforcement Authority
  • Despite El Salvador’s Strongly Worded Bitcoin Law, Bitcoin Usage Remains “Totally Optional”
  • China’s Shandong Supreme Court Holds Crypto Assets Not Legally Protected
  • Thailand Releases Crypto Custodian Regulations
  • Bitcoin Stability Leveraged in Afghanistan Amid Taliban Takeover

Continue Reading Blockchain Week in Review: Week of August 30, 2021

Weekly Blockchain Focus

  • European Central Bank announces the investigation phase of a digital Euro project.
  • SEC charges with unlawfully touting digital asset securities.
  • Federal court order permanently bans PaxForex and imposes a $300,000 penalty for offering illegal leveraged transactions in Bitcoin, Ether, Litecoin, and precious metals.
  • Shapeshift announces “largest airdrop in history” as it attempts to become a fully decentralized exchange.
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  • Tom Brady and Gisele Bündchen take a stake in cryptocurrency exchange FTX.

Continue Reading Blockchain Week in Review: Week of July 12, 2021

Weekly Blockchain Focus

  • U.S. House Financial Services Committee Hearing
  • New Jersey Attorney General Gurbir Grewal to join SEC as head of enforcement
  • FBI Bolstering Tactics Against Illicit Cryptocurrency Transactions and Cybercrimes
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  • Proposed Regulatory Framework – Cryptoassets in South Africa

Continue Reading Blockchain Week in Review: Week of July 2, 2021

Weekly Blockchain Focus

  • House Passes Crypto Bills
  • SEC delays decision on Valkyrie Bitcoin ETF – client
  • 11th Circuit Tosses Crypto Case against rapper T.I.
  • Biden nominee for Treasury Department pushes for crypto regulations
  • China Continues Crackdown on Crypto
  • South Africa Banks Block Crypto
  • UK Financial Markets Regulator Issues Crypto Warning
  • BIS Comments on Bitcoin 

Continue Reading Blockchain Week in Review: Week of June 25, 2021

Weekly Blockchain Focus

  • Crypto Rating Council releases its securities law framework
  • Diem Association announces plans to shift operations to the United States
  • Tether releases a breakdown of reserve assets
  • Bank of England deputy governor calls a CBDC probable in public remarks
  • Chainalysis report states that ransomware attacks are becoming more profitable
  • Ethiopia to begin using Cardano-based blockchain IDs in its schools

Continue Reading Blockchain Week in Review: Week of May 14, 2021