Stablecoin - tax consequences?

#1

Hi guys,

not sure if I am in the right category here etc… anyway let me know if I am not :slight_smile:

I have some questions around tax and crypto - specifically in relation to stable coins e.g. USDC

If I build a B2B platform that moves USDC between 2 businesses for products/services (e.g. a product listed for sale at 100 USDC and then bought at 100 USDC …and also I take some extra USDC in fees) then what tax obligations do those businesses have outside of my platform apart from the usual ?

I think there can be small fluctuations on USDC at the point of exchange to real dollars that can technically have some implications but I am still not fully clear.

Also, am I correct in saying that if we were using non stable coins then it gets even more complicated right ?

any help is greatly appreciated…

thanks

#2

You say it already by yourself. None outside the usual. I’m just not so sure you know your usual tax obligations … so why should you have more obligations here in the “cryptoworld” ?

There are already enough tax obligations existing.

Or do you think you should have less tax obligations, because you are using a stable coin with whom you are paying the transactions? Even that it is a stablecoin it is not really stable. It is fluctuating. So there are losses and gains. Your company has to take this into calculation so the results of your gains are correct - and your IRS accepts your calculation.

I see the main problem in your reference. Using the USDC means it comes from Coinbase. So the IRS would accept Coinbase as the legitm company for the exchange rate USDC/USD. It could be more difficult when using Tether. Should it be coinmarketcap.com who tells you what the right exchange rate to Tether/USD is ? Could the authorities accept that an internet side tells them what the correct exchange rate for a stable coin is ?

So my adcive is to ask the authories what they want and work together with them. Do they want the exchange rate for this day, the highest, the lowest or the mean exchange rate or an hourly exchange rate or even one that is correct in exactly the minute people do make their buys/sells ?

After knowing this answer you can code it! Without knowing it it doesn’t make sense. You will just get into a lot of trouble.

#3

Hi @Emmett, the client tax obligations would depend upon the country where your clients are located. If a client is in the US and buys a product with 100 USDC, as I understand, it is their responsibility to record and report that transaction for taxes. To make this easier, your business could offer a report that would summarize all client purchases in USDC (and USD equivalent, if feasible).

What kind of business are you contemplating?

#4

thanks. I am hoping that a stable coin approach is the one with the least headaches involved. Could Dai also be a good/better candidate than USDC ?

#5

Initially it would be a US based B2B platform but no reason it could not be global :slight_smile: plus crypto might pave the way for an easier global solution i.e. less complexities with currencies/exchange rates from our point of view because a) buyer and sellers just transact in stablecoin amounts and it would up to them to specify those amounts and b) easier to move crypto across the world than fiat

Since its a B2B platform then I am hoping that the tax obligations can largely be handled by the businesses using the platform. And like you said, if we can provide simple reports of a business’s transactions including times/dates, amounts etc then they should be easily able to use that when it comes to their account/tax bookkeeping ?

The business itself just centers around moving money from buyers to sellers based on procured products/services…

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#6

You never know what could happen to a decentralized stable coin. The State could turn against it and perhaps you would have to go to court why you are supporting and using it. Circle, Coinbase and GoldmanSachs are standing behind USDC. So it seems for me the best approach with the least headaches involved to follow this path.

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