Hello,
After thinking a lot about it, I decided to translate this
thread of mine for the benefit on the English speakers around the world. The thread was initially started in the Romanian section of the forum, but I think the information is relevant and should be spread to as many people as possible, in order to avoid being subpoenaed by governs or other law enforcing mechanism.
Autor:
GazetaBitcoinTopic original:
Guvernul vine! ANAF si DIICOT ii urmaresc pe traderi
There is no joke.
I talked recently with a lawyer friend, who told me about the situation (about traders being chased by Romanian govern). To be more specific, authorities are investigating some of his clients, which have to explain some big amounts of money transferred to their bank accounts.
The traders came to the lawyer as they didn’t know how to justify their trading earnings. And the lawyer asked me if I can help him anyhow.
Basically, in Romania, the situation got worst this year after the law 30/2910 was issued. This law is about taxing the profits, including the profits from crypto, but the law enforcement is not just after those who are not paying taxes, but also after those with big amounts transferred into the bank accounts.
I told my friend that he could ask his clients to obtain any possible log from all the crypto exchanges they work with, in order to prove the acquisition price, but also the selling price. Another idea was to directly contact the exchanges, who act as companies and who are granted by the law to act as money processors, and to ask them extrasses with the transactions. If possible, stamped ones. Since the exchanges use KYC and AML, they should also offer official papers when it is needed.
My friend thanked me for my suggestions and he said he’ll try these methods.
TL;DR: governs are coming! Beware!I was never a fan of centralized crypto exchanges, as they
embrace exactly the opposite of the ideas behind Bitcoin: decentralization and pseudonymity. And if everybody would use Bitcoin and the other cryptocurrencies instead of fiat money (meaning that all “cryptonians” would realize only crypto-to-crypto transactions), then there wouldn’t exist any taxable earning. But nobody (or, almost nobody) acts this way. What remains though, is that the centralized exchanges maintain the idea of trusted third party, concept which Satoshi wanted to have it fully eradicated. And, if It would be used the way it was intended, Bitcoin would eliminate any trusted third party indeed.
Most of the users go to a centralized crypto exchange because for convenience, because they don’t understand the risks or because the lack of knowledge about their alternatives.
1. Convenience is understandable. Basically, you have your funds in a wallet (which you don’t own actually, as the exchange is the true owner of the money) and you can access them anytime. And you can make transactions also whenever you want.
2. Risks, however, are multiple. “Your” exchange wallet
does not actually belong you, but to the exchange. Why? Because you don’t have the private keys. See what happened with Mt. Gox, Binance (twice), Criptsy, Cyptopia, Bitfinex etc. The same thing happens also if the owner of the exchange decides an exit scam. Without having the private keys, you don’t own the funds.
Another risk is determined by the fact that
the centralized exchanges act as banks and collect customers’ private data, being forced by governs to have implemented KYC and AML (Know Your Customer and Anti Money Laundering) procedures. And the govern is the most hungry entity for personal data. Giving your private info, together with
being totally careless about your own privacy / anonymity will only put in the frying pan, sooner or later, all those who used these “services”, as it happened with
Coinbase clients. If the users have an evidence of all transactions and if they paid their taxes, they should be OK. Besides, everything should be OK also with those who bought at a higher price and sold at a lower prices, thus without earning any profit, but hey should present these evidences as well to the authorities. However, even the “law abiding citizens”, would certainly not like at all to be investigated by the authorities.
The main problem is about those who
don’t have such evidence and with those who
don’t pay the taxes. These ones, for the governs, will appear as
criminals. As tax evazionists.
I agree, the question “if state doesn’t accept cryptocurrency as a form of money, why does it tax it?” is a good one. The answer is the following: because it generates earnings. Maybe, if there would be such thing as trading leaves, even the profits from selling leaves would be taxed.
Thus, we get to the question “how do we preserve our privacy?”.
3. Lack of knowledge about alternatives is one of the main reasons for what the crypto newbies head towards centralized exchanges. But alternatives exist.
A first solution is represented by the peer-to-peer decentralized exchanges, where the transactions are performed directly between the users, they are fully anonymous, and the role of the exchange is merely to help users to contact each other, without holding their money / private keys.
Besides, the cash-in / cash-out Bitcoin ATMs may be an alternative, because in this case there is no need to reveal personal information. Indeed, these terminals don’t use a friendly price for buying / selling crypto. But privacy has a price, though.
Finally, you can perform peer-to-peer transactions with people you know, or with people with high reputation in the field, but also with persons you don’t personally know, similar with Amazon / Ali Express transactions.
All of the above are suggestions for those willing to exchange crypto with fiat money. Only when doing this intervenes the pseudonymity and the exposure. However, while the transactions are entirely crypto-to-crypto, the anonymity can be preserved better. Besides, all of the above do not represent an advice for how to avoid taxes. Every citizen should pay his taxes. But working with centralized crypto exchanges is not just exposing the users to to governs, but also endangering their funds.
I’m closing here by admitting the contribution of centralized crypto exchanges in raising the awareness about cryptocurrencies. Perhaps, without them, fewer people would have heard about Bitcoin and other cryptocurrencies. The exchanges had and have an overwhelming role inside the ecosystem. But still, they may bring huge prejudices. Now, whoever chooses using them, can do it by fully understanding how they work.
Edit: just after writing the topic it came into mind another example of traders being chased by governs.
Also in Romania, after the first crypto exchange was closed
BTCxChange, the owner made the paperwork for fully shutting down the company. Practically, in such a case, the site (operation) is shut down, but the company still exists in the registries until it is fully closed.
Max Nicula, the owner if the defunct BTCxChange stated recently that even today, 1.5 years after closing the exchange's site, he is unable to fully shut down the firm because ANAF (the Romanian version of IRS) started an investigation when he requested to close the operations. What is very important,
he was requested to provide to the authorities all his customers names and data, which is also what happened at Coinbase. In that case, the company was
requested forced to release the clients' data in order to function, while in this case the company has (still) to give out this data in order to be shut down.
Even more intriguing is that compared to Coinbase, where was applied a decision of a Court, in BTCxChange's case ANAF came with only a formal request. Max Nicula said he didn't keep the clients' data after closing the site, therefore the investigation is still ongoing, the company is still not closed, but that's another story.
What is important is that Coinbase history repeats and I suspect there are hundreds of other similar cases worlwide.
Edit 2: for more dangers associated with KYC please read also a topic which is complementary to this one:
Why KYC is extremely dangerous – and useless.
Translations (in chronological order):
- Română: Guvernul vine! ANAF si DIICOT ii urmaresc pe traderi, translation by GazetaBitcoin
- Pidgin: Governs dey come 4 traders!, translation by Agbe
- Polish: Rządy biorą się za handlowców!, translation by cygan
- German: Regierungen nehmen es mit Händlern auf! / Vorsicht vor CEX!, translation by Buchi-88
- Spanish: ¡Los Gobiernos ya vienen a por los traders!, translation by Porfirii
- Filipino: Pag habol ng goberyno sa traders!, translation by Peanutswar
- Indonesian: Pemerintah akan "mendatangi" para trader!, translation by Husna QA
- Portuguese: [TRADUÇÃO] - Os Governantes estão chegando p/ os traders!, translation by gagux123
- Russian: Peгyлятopы идyт зa тpeйдepaми!, translation by FP91G
- French: Les gouvernements s'en prennent aux traders !, translation by iwantmyhomepaidwithbtc2
- Bengali: সরকার ট্রেডারদের পেছনে লেগেছে!, translation by Learn Bitcoin
- Urdu: !حکمران تاجروں کے لیے آ رہے ہیں, translation by JunaidAzizi
- Ukrainian: Уpяди йдyть зa тpeйдepaми!, translation by DrBeer
- Turkish Devletler Al-Satçılar için geliyor!, translation by mrust_mobile
