Solving the Complexities of Crypto Tax & Accounting With the Experts at Ledgible – Sponsored Bitcoin News

As crypto develops, and its adoption continues on the inevitable path of acceptance, so does the importance of accounting crypto properly as an asset class or source of income.

Cryptocurrencies at their core were not designed to fit into traditional financial systems, after all, that’s where some of their primary benefits over fiat and banking systems are found. For crypto natives, trying to fit the square peg of crypto into the round hole of traditional finance is done begrudgingly, often come tax time – or in the case of businesses with crypto, monthly to close books. In the US and other regulated economies, these actions are necessary evils to maintain crypto – but accounting for crypto neither has to be hard nor detrimental to the overall crypto ecosystem.

But let’s back up for a moment.

A Paradoxical Equation

As companies and funds continue to make the push for a Bitcoin spot ETF and other financial products involving cryptocurrency functioning in the more traditional financial ecosystem, we’re left with a somewhat paradoxical equation.

Mass crypto adoption – particularly within hedge funds, institutions, and other large organizations – is a net positive for the space. This will encourage innovation and allow for the permanent adoption of crypto currencies. This adoption is what most crypto enthusiasts want, but the paradox of it all will lead to a relationship that benefits both crypto and financial regulations.

We’ve seen numerous crashes of companies like Celsius, Three Arrows Capital, and others as we fall into what is likely another crypto winter. This is all reminiscent of the crashes and results seen in traditional financial markets, where greed and poor management were a few of the most pernicious behavior. Historically, these outcomes have brought greater scrutiny on the space – more regulation – but have all worked to build a more stable financial ecosystem for consumers and investors alike.

So we’re left with a paradox, the merging of decentralized digital currency and centralized regulation. What can be done to solve this paradox?

New regulation may be one part of this puzzle, but it is not the only piece. There have been plenty of rumblings and discussions, but nothing substantial has come in the space of US-based or even global new regulation in the crypto space – So far. The other piece of this puzzle is simple – bridge the gap between crypto and traditional finance in a way that maintains the structure of both spaces. The symbiotic relationship will allow both sectors to benefit each other.

Ledgible solves this problem.

It is essential to be able match crypto in the worlds of accounting and tax, so that there can be a solid bridge between traditional and crypto. The underpinnings and secrets of traditional finance. CertainHowever, if crypto is easily integrated into accounting and tax space, we can solve the paradox above.

Crypto data can be standardized and normalized rather than reinvented. LedgibleTraditional finance and accounting allow CFOs, accountants and tax professionals, to correctly account for cryptocurrency in their workflows. They would do the same with other traditional assets like bonds or stocks.

This also means that what makes crypto, crypto – the decentralized nature, 24/7 trading, staking, Defi, protocols, and more – gets to continue making crypto,It is possible to do so., crypto. Rather than further integrating crypto into traditional assets, alongside stocks & bonds, the financial ecosystem is able to keep traditional financial products in one vertical, and crypto assets in their own vertical, easily bridged by solutions like Ledgible.

All this going to say, ensuring the inevitable adoption of cryptocurrency as it continues its path to the mainstream doesn’t have to strip the asset class of what makes it unique. Crypto can continue to do what it is best by quietly using the right tax and accounting tools.

It is clear that bridging crypto-traditional finance gaps is the best path. This was also evident at the high level. What specific problems is this team taking on?

Solving the Tax & Accounting Problem

IRS Notice 2014-21. 2014-16 I.R.B. The IRS Notice 2014-21, 2014-16 I.R.B. 938 provides basic guidelines for digital currencies. Digital currency is considered property in Federal income tax. From there, current tax law applies – but what does this really mean?

Bridging the gap between traditional and crypto finance is, as we have said, connecting crypto to bulky regulations, such as those from the IRS. The IRS is increasingly scrutinizing crypto transactions. With still not definitive, custom-tailored guidance around crypto coming from the IRS or other governing bodies, there’s still a lot of room left for interpretation with digital assets. This is also noted in another article about crypto tax guidance.

“US tax law requires US citizens to pay tax on income from any source derived and much of the tax code addresses the taxability of various income types – or how income is earned. Wages, for example, are subject to social security taxes while interest payments are not. Capital gains usually have a lower tax rate than ordinary income. In some cases the tax treatment of income depends on the legal structure of the business as well as how many hours a taxpayer actively participates in an activity.”

Keep your eyes open if you feel like they are glazed over. Financial regulation and tax code is no fun – especially in the crypto space, which is why Ledgible ingests that tax code and quietly and automatically applies it to crypto holdings and trades… making it Ledgible for… Hopefully, now you understand.

Ledgible is solving crypto tax and accounting challenges by taking the hassle out of it. The platform is a middleman, ingesting non-standard crypto data and then spitting out standard trade and accounting information.

But with the problems identified, and properly solved for – how does all of this make crypto tax and accounting easy and even beneficial to the user?

How Crypto Accounting is Beneficial

At the beginning of this article, it was called out that properly accounting for crypto “neither has to be hard or detrimental to the overall crypto ecosystem.” Keeping true to that statement, let’s discuss the potential benefits.

Crypto winters are perhaps the greatest time to discuss proper crypto accounting as in downturns and times of heavy selling, there’s no better time to leverage crypto to reduce your overall tax burden. To maximize your crypto gains, you can utilize strategies such as tax-loss harvesting.

Properly accounting for crypto in upswings is also necessary, as ensuring that you don’t make trades that leave you with a potential massive tax bill, or at risk of audit, requires some planning – and usingUse a cryptocurrency tax tracking tool.

Simply put, proper crypto accounting means that traders can follow the rules and reduce audit risk. They also have the ability to leverage existing rules for their advantage. The barrier to entry in the crypto space is decreasing as traditional finance and crypto merge, attracting more interest and ultimately a greater level of success.

 

 

 

 

 

 

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