The advantages of crypto-currencies are known to all, but little is said about the risks they pose to their users. That is why you can hurt yourself unintentionally, hence the need to know the other side of the coin.
Since you are only required to provide a public address, cryptocurrency transactions are often considered private, beyond authorities’ control.
However, you are only partially anonymous when using most cryptocurrencies, and you can even be tracked from blockchain to blockchain.
For example, Heather Morgan and Ilya Lichtenstein were arrested in 2022 while trying to launder $ 4.5 billion of crypto-currencies.
Authorities could do this by monitoring the cryptocurrency wallets they owned and were therefore identified when they tried to move the coins.
If you want complete privacy, you can use several cryptocurrencies, such as Monero (XMR) and Zcash (ZEC). However, these cryptocurrencies are not as popular. They may not be widely accepted for transactions.
Most financial regulatory authorities, such as the CFTC, consider cryptocurrencies commodities, so you must declare any income you earn from their sale.
A capital gains tax is applied to all profits, as with any other investment such as real estate, shares, etc.
Therefore, if you do not report income from the sale of cryptocurrencies, you may be subject to tax penalties.
This means that you may pay more taxes, or even more penalties, simply because you have yet to report your income.
It is, therefore, essential to understand your country’s tax laws and comply with them to avoid high taxes and penalties that can damage your reputation.
Sale of securities
Selling cryptocurrencies to another person with the promise that the funds will be used to create a product is considered securities trading and must be reported to regulatory authorities. Selling unregistered securities is a crime that can result in fines, as in the years-long case between the SEC and Ripple Labs.