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| 1 minute read

Where do we go from FTX?

Very interesting insights by David Canedo (via Bloomberg Tax) reflecting on some of the challenges with crypto tax reporting for 2022 following the FTX saga.  He explains the difficulties in ascertaining the tax basis of the crypto given present scarcity of the trading data, as further hampered by the unknown residual value of assets pending completion of the Chapter 11 reorganisation as well as uncertainties regarding the potential for clawback of withdrawn assets under bankruptcy proceedings.  As a result, for some it may be impossible to currently determine what may or may not be deductible.

More broadly, however, I am drawn to the proactivity of his suggestion that instead of demonising crypto and the wider fintech industry we should embrace the opportunity to translate lessons learned in accommodating other once new technologies in our recent past (as well as the very immutability of blockchain itself) to cultivate a suitably safe ecosystem and modus operandi to allow this new world to flourish.  As he reflects "most of the pain of 2022 has been caused by bad actors embezzling funds through centralized exchanges" and "scams were perpetrated through fraud and deception, not through the blockchain".  

It is not the technology which is inherently dangerous, but the unbridled use of it. Properly led (heeding the well-trodden path of regulation and good corporate governance), the transparency that blockchain's indelible essence can afford may prove its greatest asset. 

It could be years before we can close the page on the FTX saga and move on. But just like Enron became the poster child for internal controls following the Sarbanes-Oxley Act of 2002, FTX will become the poster child for crypto regulatory transparency and reporting.

Tags

blockchain, crypto, new technology, regulation, taxation, thinkgibraltar
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