Topic: BITCOIN WALLET (Read 728 times)

Damn, paying wealth tax on something you don't own anymore, forever? This would be cruel

This makes sense; so just make sure to not lose wallet files twice in a country with wealth tax, I guess?! I'm being honest; this is a thing that can and does happen to people.

US here, but I am going to guess the same thing that happens here when anything is stolen that cannot be traced. The government accepts you at your word. And, if it ever comes out or can be proven that you lied you get arrested and charged with fraud.
It also is probably one of those things you can only do once. If it happens again, although they might let you claim it, they are going to look through all your finances very closely and see if they can find anything that is "not correct".

Kind of like a lot of stolen art fraud. Buy expense art, sell it under the table, claim theft, collect insurance.

-Dave

So I am an Australian. I have Bitcoin in a wallet that I can prove belongs to me. For example, I purchased the coins on a centralized exchange where I performed KYC. I withdrew them from there to my wallet and that should be enough to prove they are mine. To avoid paying taxes, I "lose" my coins. I send them out over TOR to another Bitcoin wallet. From their, they get mixed, coin-joined, converted to Monero, gambled with, etc. Omg, I am so unlucky, someone stole my coins, but thankfully, I can claim capital losses.

I wonder what the Australian authorities would say to a claim like that. 

It is of course impossible to prove the non-existence of anything. I can't prove that dragons aren't real, and I can't prove that I lost the only copy of all my private keys and seed phrases in a tragic boating accident. No reasonable court would say "Prove you have forgotten the password" or "Prove you don't have the seed phrase backed up somewhere", because it is impossible to do so.

In the US, loss of property (which is what bitcoin is classed as) can only be deducted from your taxes when it is caused by a federally declared disaster. So forgetting your wallet password or failure of your hard drive absolutely would not count. Now, the US doesn't have a wealth tax (at least, not yet!), but for the sake of capital gains taxes, losing your bitcoin wallet means nothing for the taxes you owe. It would seem particularly cruel to continually charge someone a wealth tax on money they can't access however, perhaps without which they would be well below the threshold and making them pay out from their regular income.

I did also find this document from the OECD:

Yup, for sure, but they should keep this in mind before mindlessly cashing out in their current country is what I'm saying..

That's an interesting scenario. If we try to translate it to a pre-crypto scenario, it would be something like losing a bag of gold coins, then finding another equal sized one in your garden years later for example. It should be handled the same way with lost wallet / wallet password. It's hard to prove that you don't have a backup somewhere, though. I would argue it's impossible to prove there is no backup in some drawer. So in the end it would depend on your law: if it's your burden to prove you don't own something or if it's the authorities' burden to prove you do. I'm not a lawyer and have no idea how this is handled in any country, but it would be interesting to know.

If it's several million dollars worth you are talking about, then that is more than enough money to easily migrate to a country with more friendly bitcoin laws if you are concerned about a wealth tax.

I wonder what has happened in scenarios where people have lost access to their wallets or keys for a number of years (and therefore not paid wealth tax since they don't technically own that money) before managing to recover them, find an old back up, brute force them with newer technology, etc. Have tax authorities gone after them for historical wealth taxes?

Only issue with super well hidden and anonymous funds, especially if there is no three-letter agency behind your ass: there will be a point in time where you'll want to spend those millions and then it may be hard to argue where that money came from. This is why I have this bookmarked:


By keeping the private keys, you can always prove you just bought the BTC in a point in time when you were able to afford them.
However, you'll have evaded wealth tax for years in case you lived in a country collecting such a tax. This might put you into jail.
So it's tricky to hold funds completely secretly, without landing in jail! Everyone should make sure to consider this.

I don’t shill Ledger so don’t make such accusations if you don’t have concrete evidence for it. I’m just talking about specific data that can be found online, and you’re guessing something based on your feelings. The fact that we are discussing something does not mean that we advise someone to buy it, on the contrary - we warn of all the bad features or omissions that these companies have made over the years.


You completely misunderstood what I meant - I'm just saying that despite all the bad things surrounding the two most famous HW manufacturers, no other company has emerged to offer a product that would become the killer of Ledger&Trezor. This does not mean that there are no alternatives, as I have already written, let everyone decide which device is best for him - and after all hardware wallets are an alternative in themselves - there are many other ways to store cryptocurrencies, and some may be safer than any HW.

Yeah, who knows? The courts themselves don't know until if and when such a case actually occurs, and even then I'm sure it would get bounced up through the chain of courts and appeals. In such a case where the defendant will be going to jail for embezzling $40 million anyway, would it make much difference if that number was actually found to be $200 million? Or would it make much difference if the defendant stuck to a story that they do not know the seed phrase/wallet password and so cannot reveal the true amount of bitcoin contained?

Anyway, to get somewhat back on topic, the safest wallet for you is going to be the one which protects best against the attack vectors which you deem most likely for you. If you honestly believe those attack vectors are from a three letter agency, then although a hardware wallet or encrypted airgapped wallet might prevent them from accessing your funds, you'll need to go to much greater lengths if you want to hide the existence of those funds altogether.

It's certainly interesting to think about. Imagine that the defendant was accused of embezzling 1000 BTC, but the actual number is much higher, 5000, for example. The court only knows and has evidence for the 1000 BTC. Providing them with access to the computer would be self-incriminating if they can obtain evidence for the remaining 4000 bitcoin. I wonder what would happen then.   

So, this case is a little more nuanced than that.

If you read the court documents, you'll find that they specifically mention that the Eleventh Circuit found that the defendant should have their Fifth Amendment right against self-incrimination applied in such scenarios. The difference here is that the courts already knew what was on the encrypted hard drives (partly from testimony from another person and partly from records from the associated computer they were attached to), and they already had enough evidence from other sources to convict the individual in question. For those reasons, the court said that forcing the individual to decrypt the hard drives would not amount to self-incrimination since it would not change the outcome of the court case or their final ruling.

This scenario could potentially apply to bitcoin if law enforcement knew you had a bitcoin wallet and also knew the addresses in it, as unlocking it does not incriminate you any more. If you had a bitcoin wallet and they did not know which addresses were in it, could you argue for your Fifth Amendment rights? I don't know the answer to that.

The United States is a legal and logistical nightmare in such matters. They have Supreme Courts and Federal Courts.

This source that I found says that in 2019, the Massachusetts Supreme Court forced a defendant to reveal the unlocking code for this phone. During the same year, Pennsylvania’s Supreme Court ruled that an accused individual does not have to disclose the password for his computer. Those are just some cases with courts of the highest level.
When it comes to Federal Courts, the Third Circuit Court of Appeals ruled that a defendant had to unlock multiple computers and devices. But, the 11th Circuit Court of Appeals ruled in favor of the defendant in a similar case. 

Then we have the issue of biometrics. The source says:
...
...
 

The conclusion is that it's safer to use a password/pin code than biometrics when it comes to password-protecting your personal devices.
*All quotes are from the source mentioned above.

I don't work at a hardware wallet company, so I have no numbers, but if you look outside the Trezor-Ledger-bubble, you'll find big communities of each of the other wallet brands (chat groups, Twitter followings, etc. - I know any one of those metrics can be faked, but look at the bigger picture).

Even though they may not sell millions, they still sell many. And I'd encourage that, instead of continuing to shill Ledger, 'it must be good because they sell many', because this shilling may be the exact reason why the others sell less than a million devices each.

I know, I know, hen and egg problem and all, but I think you get the idea.

Actually, I don't even understand your point or opinion, starting here:
You are trying to say that there are no good alternatives to Trezor and Ledger, because they have security bugs and bad customer data handling? How does this make sense? Exactly because these wallets have flaws, we should look at the alternatives..

If you are a target of a major government or one of their agencies such as the FBI, then the security of your wallets is almost inconsequential. They'll put you in jail regardless.

Laws specifying whether you can be required to provide your decryption key or password for data files to law enforcement or other agencies vary depending on the country you live in. US courts seem to (so far) be saying that doing so would violate an individual's Fifth Amendment rights. I'm not aware of any rulings in the US relating to handing over your bitcoin wallet passwords, seed phrases, private keys, etc., though. There was a case in Germany of someone who spent two years in jail (he's since been released) for installing mining software on other people's computers, but refused to hand over the password to a wallet containing around 1,700 BTC. I can't find out whether he has since been able to recover or spend any of those 1,700 BTC without the police coming knocking, though.

But yes, I agree. When thinking about wallet security you should be focusing on the most likely attack vectors, which for most people will be the opportunistic attacker or maybe a targeted attack by one or two individuals. If you think that your most likely attack vector is that of a nation state, then you've got far bigger problems to deal with.

Is that something you can back up with a fact or just your personal opinion? I did not find data on how many of these HWs were sold, but Ledger announced a few months ago that it had sold over 3 million devices, while some estimate that the number of Trezors is slightly less than that, but still in the millions.

it's one thing to want to stay protected from a thief who targets you and wants to steal from you. It's a whole other level if you get on the radar of a serious government agency who decides to take you down (darknet markets, Silk Road, etc.). Your primary concern should be to to remain protected from the first type of adversary. Your secondary concern should be not to do illegal things that would result in you becoming a target for the latter. Because if you do, you are gonna have more important things to worry about than how safe your bitcoin wallet is. This is not a response to you personally, just some of my thoughts. No one is untouchable.    

They do sell in large quantities.

Then answer the question why these alternatives are not sold in larger quantities after the competition has proven that it is not capable of being up to the task when it comes to the safety of their customers, or vulnerabilities that cannot be fixed? I'll tell you why, because they're not powerful enough to deserve that trust at all - nothing sells on its own, no matter how good it is.

There are certainly tons of tried and trusted alternatives today, just a few that come to mind are BitBox and ColdCard.
Check out this great list: [ LIST ] Open Source Hardware Wallets

I agree, I prefer to give the resources and let the person decide on their own; no wallet is perfect and it comes down to personal preference what drawbacks are okay for you and what is unacceptable for you.

Unfortunately, there is no other manufacturer that has managed to impose itself as an adequate alternative to Ledger or Trezor if we take into account everything that happened to Ledger, but also the irreparable vulnerability that was discovered on Trezor. This shows us that there are no serious players in the market, but only some who obviously do not have enough money or ideas to become somewhat relevant.

All this together benefits those who live from the old glory, and instead of achieving the highest possible quality and safety, they constantly run into new problems. I am of the opinion that people should be advised to consider buying hardware wallets, but they should not be explicitly suggested what exactly to buy.