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Crypto News Updates

The Virtuous Cycle of Bitcoin Giving

Higher Prices Mean More Giving. More Giving Means More Adoption

Bitcoin has left every other asset class in the dust. And that outperformance didn’t just take place this year — it’s outperformed every asset over the last five-year and 10-year periods. As we approach a new all time high, 99 percent of bitcoin owners are in profit. Given how rapidly bitcoin has appreciated, it shouldn’t be surprising to hear that price rallies lead to significant bitcoin donations. 

The last time Bitcoin hit $20,000, we saw over $100 million worth of bitcoin donated to nonprofits in one month. A huge chunk of that was from the Pineapple Fund which donated about $56,000,000 to 60 different nonprofits. The Pineapple Fund supported a wide range of causes like Pencils of Promise, the Mona Foundation and The Water Project. 

But Why Do People Donate Bitcoin? 

Donating appreciated bitcoin is often the most tax-efficient way to support your favorite cause, whether its childhood hunger or education. The tax benefits are very similar to donating appreciated stock. People like Jack Dorsey don’t donate $1 billion worth of Square stock for the sake of convenience. He and many others donate their stock for the major tax benefits. 

Ask your financial advisor, it’s a common tax strategy. They’ll tell you to donate your most highly-appreciated asset first. Since the IRS classifies bitcoin as property, that means no capital-gains tax and a fair market value deduction on your tax return, which means you could be saving over 30 percent, so it’s a great way to offset some (or all) of your capital-gains taxes in a bull market. I’d be willing to bet Dorsey donates in bitcoin next time.

What’s even better? If you already donate using a credit card or other traditional method, you’re leaving money on the table. Donate a certain amount in bitcoin and repurchase that exact amount. Since there’s no “wash rule” for bitcoin, it’s actually even more tax efficient than a stock donation. You’ll get a 20 percent to 30 percent higher deduction on your donation since it will be in pre-tax dollars. Although I use the U.S. as an example, this is also the case in many other countries — but make sure to consult with your tax advisor.

Creating A Virtuous Cycle

Beyond the tax benefit, bitcoin giving creates a virtuous cycle. More bitcoin gifts result in more nonprofit adoption, which results in more mainstream awareness, which results in higher prices. One impact of the Pineapple Fund that isn’t often discussed is the impact that the donations had on mainstream adoption. Imagine hearing about Bitcoin for the first time because your favorite charity got a $1 million bitcoin gift. That’s a very different way of introducing people to Bitcoin.

The Pineapple Fund created positive press in almost every mainstream media outlet. It has been the largest “bitcoin for good” story to date. I wouldn’t be surprised to see similar stories pop up once we hit a new all-time high. How long until a major cryptocurrency company CEO decides to make a multi-million-dollar bitcoin donation? It probably won’t be long until we see something similar to the Pineapple Fund. 

The bottom line: Would you rather donate to your favorite charity or the IRS? Donate bitcoin to one or more of the 120-plus bitcoin-friendly nonprofits for this Bitcoin Black Friday and Bitcoin Tuesday here. 2020 has been great for Bitcoin awareness. Let’s make sure we keep the virtuous cycle of bitcoin giving going. 

This is a guest post by Alex Wilson. Opinions expressed are entirely his own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

The post The Virtuous Cycle of Bitcoin Giving appeared first on Bitcoin Magazine.

Source: Bitcoin magazine

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Crypto News Updates

New Civil Liberties Alliance Challenges IRS Collection Of Private Crypto Investment Data

If you’re a bitcoin trader or investor, you’ve probably traded on multiple cryptocurrency exchanges and, for the most part, trusted that those exchanges are keeping your data secure from unlawful data collection just like a bank or credit card provider would. Unfortunately, that doesn’t seem to be the case. 

On July 15, 2020 (Tax Day this year), New Civil Liberties Alliance (NCLA) filed a lawsuit on behalf of James Harper against the IRS, challenging the agency’s unlawful collection of private cryptocurrency information.

Harper decided to take this action against the IRS after he received a letter from the agency in August 2019 as part of its ongoing effort to alert taxpayers about crypto tax filing requirements. Harper wants to hold the IRS accountable for violating his privacy and identifying him as a cryptocurrency holder.

According to a case summary, “NCLA represents Mr. Harper before the United States District Court for the District of New Hampshire. Mr. Harper’s ‘crime’? Holding a bitcoin wallet. The lawsuit argues that the IRS has acquired the unbridled power to demand and seize Americans’ private financial information from third parties without any judicial process in defiance of the Fourth and Fifth Amendments and statutory protections.”

Some of you reading may even know Harper. He bought his first bitcoin in 2013 and has been an active member of the community ever since. According to the case, he has always paid his applicable taxes and reported his bitcoin trades. Like many of you reading, Harper used a few different cryptocurrency exchanges to conduct his trades, all of which contractually promised to protect his private information. 

Last year, Harper became one of 10,000 crypto holders to suddenly receive a letter from the IRS stating that it had obtained his financial records from the cryptocurrency exchanges without any particular suspicious of wrongdoing. Additionally, the IRS failed to meet its statutory duty to give Harper advanced notice and an opportunity to challenge the seizing of his crypto data.

I’m not a lawyer, but that doesn’t sound like something the IRS should be able to do. I thought the government needed a subpoena to obtain private information. Is it able to obtain any data it wants without a warrant? So, what does a lawyer on the case think of this?

“There’s no IRS exception to the Bill of Rights,” Adi Dynar, a member of the litigation counsel, told me. “The people who own cryptocurrency do not thereby give up the right to secure the privacy of their private financial information. No federal official should obtain private financial information without giving its owner adequate notice and opportunity to contest. Especially so when the federal official has not obtained a valid subpoena or warrant from a court. Otherwise, it is a short, slippery slope into an unfettered surveillance state.”

When I sign up for a cryptocurrency exchange account, or any other service with a third party that contains private information and is contractually obligated to protect my private information, that is exactly what I expect that third party to do. It’s frightening to see the third party and government sidestepping our contractual rights and law. This makes me wonder what other information is being collected by government agencies without a warrant. Unfortunately, it seems like we’re much further down the path of a surveillance state than most realize. I hope that NCLA’s lawsuit will right this wrong and protect people from unlawful searches and seizures in the future.

Given NCLA’s close alignment with the cryptocurrency community, it has recently started to accept cryptocurrency to help fund this case. Your donation of bitcoin or other cryptocurrency to the New Civil Liberties Alliance is one of the most tax efficient ways to stop government overreach. Learn more and support it in its case against the IRS here.

This is a guest post by Alex Wilson, co-founder of The Giving Block. Opinions expressed are entirely his own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

The post New Civil Liberties Alliance Challenges IRS Collection Of Private Crypto Investment Data appeared first on Bitcoin Magazine.

Source: Bitcoin magazine