The world of finance has been waiting for the cryptocurrency industry to mature and become more widely accepted. So far, despite the efforts of many crypto enthusiasts, the industry has not taken off in the way that many had hoped.
As reported by POLITICO, a recent survey conducted by the International Monetary Fund (IMF) has shown that although cryptocurrencies are more popular than ever, their acceptance is still a long way off.
According to the survey, only 3% of respondents use cryptocurrencies such as Bitcoin and Ethereum. While this may seem like a small number, it is actually a significant increase from the 2018 survey, in which only 1% of respondents reported using cryptocurrencies.
So, what is holding back the widespread adoption of cryptocurrencies? There are several factors at play.
Firstly, there is a lack of understanding and education around cryptocurrencies. Many people still view them as a niche product for tech-savvy investors, rather than a viable alternative to traditional financial systems.
Secondly, there are concerns around the volatility of cryptocurrencies. Prices can fluctuate rapidly, making them a risky investment for those who are not familiar with the market.
Thirdly, there is a lack of regulation in the cryptocurrency industry. Governments around the world are still grappling with how best to regulate these digital assets, which can make investors wary of getting involved.
Despite these challenges, there are many who believe that cryptocurrencies are the way of the future. Advocates argue that blockchain technology, which underpins cryptocurrencies, has the potential to revolutionize the financial industry.
There are already signs that some countries are starting to embrace cryptocurrencies more fully. China, for example, is developing its own digital currency, while the European Union has recently proposed new regulations aimed at making cryptocurrencies more accessible to investors.
In the meantime, it seems that the cryptocurrency industry still has a long way to go before it becomes a mainstream asset class. But with each passing year, more and more people are becoming interested in this nascent market, and it may only be a matter of time before cryptocurrencies become a part of our everyday lives.
The IRS has been relatively quiet on the topic of cryptocurrency for some time now, but it seems that this silence may continue for a while longer. At the recent crypto conference Consensus 2023, an agency official stated that the IRS hopes to release some new guidance “in 12-ish months,” according to CoinDesk. This is a pressing issue, as the IRS has previously stated that cryptocurrency is contributing to the US’s massive tax gap. However, the rules surrounding crypto and taxes are complex and controversial, and the agency has provided little clarity on the matter.
Congress passed legislation in 2021 requiring cryptocurrency brokers to report transactions involving digital assets to the IRS starting in 2023. New laws also subject digital assets to basis reporting, which would allow the IRS to determine how much taxpayers made on a crypto trade and therefore owe in taxes. However, the IRS announced in late 2022 that the implementation of these laws would be delayed until it published proposed regulations and solicited comments. No timeline was provided.
The presence of Julie Foerster, the IRS project director for digital assets, at Consensus 2023 appeared to be something of a listening and get-to-know-you session. Foerster emphasized the need to increase communication between the agency and the crypto community and acknowledged that the IRS needed to look at the skills of the people it employs to deal with digital assets. The agency’s strategic plan includes hiring more experts to deal with digital assets and developing “New analytics-enabled capabilities … to support digital asset compliance.”
As artificial intelligence (AI) becomes an increasingly prominent force in the tax world, there has been much discussion about its effects. One bot, ChatGPT, was found to do well on tax scams but struggled with accounting exams. Brigham Young University has released a report measuring ChatGPT’s performance and found that human students outperformed the bot in accounting exams. The researchers noted that they expect the bot’s newer version, GPT-4, to improve on the issues ChatGPT had with accounting questions.
Overall, the IRS’s continued lack of clarity on cryptocurrency and taxes is a concern for those in the crypto world and some lawmakers. It remains to be seen when new guidance will be released, but it seems that it will be a while yet. However, the agency’s focus on hiring experts and developing new capabilities to support digital asset compliance is a positive sign that it is working to address the issue. Meanwhile, as AI continues to advance, its impact on the tax world is likely to be significant, whether through catching tax cheats or helping to improve teaching and learning for future tax professionals.