'The historically slow pace of regulatory change is finally catching up to where the ecosystem is today,' writes shawn_douglass, co-founder and CEO of amberdataio. Opinion. TaxWeek, sponsored by koinly
With the inception of crypto marked by the publication of the bitcoin white paper in October 2008, the industry is only 14 years old. However, the historically slow pace of regulatory change is finally catching up to where the ecosystem is today, with governments like the United States, Singapore, Australia and others issuing new frameworks and guidelines for how cryptocurrencies will be taxed in their jurisdictions.
Perhaps most surprising of all, in the U.S. any movement of tokens or digital assets between wallets, centralized exchanges or individuals is regarded as a taxable event as well. In particular, financial institutions, such as exchanges, hedge funds, prime brokerages and trading desks could have millions of transactions to record, report and pay taxes on.due to poor accounting practices could result in the organization having to pay back taxes and face additional large fines.The high stakes combined with the challenges of accounting for millions of transactions necessitates the implementation of programmatic software for accessing and tracking granular data.
Participating in decentralized finance protocols can make tax accounting even more complex. For example, if an institution is providing liquidity on a decentralized exchange , it also needs current and historical liquidity provisioning positions , current and historical percentage of the total pool owned, fees earned, claimed and unclaimed, as well as the percentage fee provided by the pool.
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