Bitcoin – Profile of the Customer and Their Identity

If the government or the law enforcement agencies would come up with a list of blacklisted transactions that are coming from and going to specific transaction addresses, then 51% of support from miners would be slowed down, and in some cases, it can even get blocked entirely.

In cases of private transactions, it is not easy to know to whom the address belongs to.  If the privacy issue is solved, it will be easy for the government to narrow down to people who are carrying out some transactions.

Privacy, however, is essential to prevent being clamped down due to regulators and their demands.  The critical property of cryptocurrency is privacy and fungibility.

Those who own cryptocurrency are often confused by the conflicting guidance they get from the regulators.  The regulatory oversight of the crypto industry is insufficient in the current level.  Despite the companies having to meet strong “know your customer” requirements, they will not be able to get approval from the SEC without showing that the underlying market is regulated.

Regulators from across the world are growing with the fast-growing cryptocurrency market.  There have been only fewer regulations from the United Kingdom and France. Among all, the US approach in the process is either over-inclusive or under-inclusive.

Confidential electronic transfers that happen from one party to another without passing through a financial institution are subject to regulatory scrutiny.  The IRS and the FinCEN regulate these transactions.  Immaterial of whether the cryptocurrency is physical or digital and without any consideration to whether the value is small or big, the Bank Secrecy Act regulations applicable to money services will apply to cryptocurrency as well.

The IRS has recently issued a few guidelines regarding the cryptocurrency transaction of airdrops.  The Officials at the IRS have indicated that they will very soon be coming up with criminal tax indictments, probably related to intentional evasion of taxes and also associated with tax fraud.

Paying tax dues on cryptocurrency is crucial for anyone who has obtained the letters from the IRS. Everyone who is involved in cryptocurrency transactions needs to know that these transactions are not in any way free from federal scrutiny.  The transfer of cryptocurrency is treated as a sale of capital assets, and these transactions are taxable.

To determine the level of risk represented by the individuals involved in cryptocurrency transactions, the money service business should have a clear idea of the profile of the customer and their identity.


Richard Newman

Richard is the Editor-in-chief of Bitcoin Journal. He has over 10 years of experience with the news industry mainly handling the editorial cycle.

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