Ethereum Foundation Trades 1,700 ETH for $2.76 Million in USDC

Blockchain sleuths spotted the Ethereum Foundation trading 1,700 ETH for a hefty $2.76 million in USDC stablecoins. This comes hot on the heels of Ethereum’s co-founder, Vitalik Buterin, transferring a cool $3.79 million in ether within a mere ten days.

Ethereum Foundation Parts With Ethereum in $2.76 Million Stablecoin Deal

We’ve read about the rise and fall and rise and fall—you get the idea—of Bitcoin. Bitcoin is just one of a number of cryptocurrencies currently being exchanged worldwide. Also known as virtual currencies, computerized transactions are verified and recorded in a publicly distributed ledger, called a blockchain. This ledger remains mostly anonymous, hence the reason many are lured toward the use of cryptocurrencies in everyday transactions. The exchange of cryptocurrency is mostly performed by specialists such as Btc.sx, BTCChina, Coincheck, Coinbase and LocalBitcoins, but are also exchanged privately between users. Because these types of currencies are less impacted by physical boundaries, one question is how might this affect international reporting protocols?  

Cryptocurrency exchangers that register as a money transmitter must develop, implement and maintain an effective anti-money laundering program that includes a process for verifying customer identification. The IRS wishes to identify records that will reveal the identity and transaction activity of cryptocurrency users who are U.S. persons. This information may be used to identify and correct federal income tax liabilities of those who conducted convertible virtual currency transactions as defined in IRS Notice 2014-21.

Holding virtual currencies in a foreign exchange marketplace may trigger an “other foreign asset” that is reportable on IRS Form 8938. The treasury has not yet issued guidance about these exchanges being considered a “financial institution” or a wallet to be considered a “financial account,” which would require reporting on the Foreign Bank and Financial Account Report (“FBAR”) and Form 8938.

If there is uncertainty about if the exchange is foreign, it is best to consider reporting the asset rather than not reporting it at all. This is strictly for informational purposes; there is no actual tax computed on the value of your foreign holdings. The IRS has steep penalties for failing to report these types of information. So, if you want to avoid risking a $10,000 IRS penalty for non-filing, play it safe and disclose all holdings.

Through the decentralized platform, Uniswap, the Ethereum Foundation executed the 1,700 ETH for $2.76 million USDC swap. Eagle-eyed observers and the sharp team at Scopescan didn’t miss a beat. “The Ethereum Foundation has just sold 1.7K ETH ($2.76M) for USDC,” announced Scopescan at a bright and early 4:25 a.m. Eastern Time on Monday. Naturally, this stirred some buzz in the crypto sphere.

“Ethereum Foundation sold 1,700 ETH for $2.7 million because: They are paying to their workers. They are building new projects. They’re supporting new devs and projects. Don’t panic,” advised a fervent ether enthusiast.

This transaction trails Buterin’s recent move of shipping $3.79 million in ether to centralized platforms within a span of ten days. Data from Arkham Intelligence reveals that the Ethereum Foundation’s coffers still boast a staggering 316,761 ether, valued at a whopping $501 million. Additionally, they’re sitting on a nest egg of around $49 million in wrapped ether (WETH).

Historically, the Ethereum Foundation has been transparent with its finances, releasing periodic reports. It’s anticipated that this latest trade might feature in their upcoming disclosure. Today, ETH’s value dipped by over 3%, seemingly influenced by tensions arising from the Israel-Hamas strife. The crypto giant, second only in market cap, has seen its value slide below the $1,600 mark, currently trading at $1,578 per token.

Cryptocurrency: It’s mysterious, it’s volatile and it’s all over the news. At the start of 2017, one Bitcoin—the most well-known cryptocurrency—equaled approximately $800. By the close of that same year, one Bitcoin approached $20,000. Cryptocurrency is so mercurial, in fact, that taxing and regulating bodies are just now starting to take a closer look.

The Internal Revenue Service has issued basic guidance stating that it considers virtual currencies to be property. IRS Notice 2014-21, 2014-16 IRB 938, 03/25/2014, IRC Sec(s). 1001 addresses the sale or exchange of convertible virtual currency and its use in economic transactions. The currency must be included in computing the gross income of each transaction. The amount of such income is the fair market value (“FMV”) of the virtual currency as of the date that the virtual currency was received.  

Public exchanges do have a record of their users and their wallets, but no Form 1099s are being distributed. The IRS has said that anyone who uses virtual currency as a form of payment must issue a 1099 when the gross amount exceeds the reporting thresholds.  

The IRS has recently been looking at individual tax returns for unreported gains from virtual currencies and recently won a court battle when it issued a John Doe summons for all account holders’ information with transactions over $20,000 on Coinbase from 2013 to 2015. Under the Tax Cuts and Jobs Act, the IRS addressed like-kind exchanges limiting the exchange only to real property that is not held primarily for sale. As such, cryptocurrencies can no longer be exchanged for other like-kind property -- so trading one cryptocurrency for another is no longer a tax-free exchange.

If cryptocurrency use increases and becomes more mainstream, regulating bodies are sure to play a greater role. That makes this, one more area to check for tax risk exposure.

What do you think about the Ethereum Foundation parting ways with 1,700 ether? Share your thoughts and opinions about this subject in the comments section below.

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