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One Trader Made $200M Trading Ethereum...And Nobody Knows Who To Tax - Printable Version

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One Trader Made $200M Trading Ethereum...And Nobody Knows Who To Tax - Zero Hedge - 07-10-2017

One Trader Made $200M Trading Ethereum...And Nobody Knows Who To Tax

<p>During Ethereum&rsquo;s big rally last month, when the price of a single coin went from $220 to just shy of $400 in the span of two weeks, one trader turned $55 million of paper wealth into more than $398 million.&nbsp; And nobody knows who they are, or &ndash; more importantly &ndash; who to tax.</p>
<p><strong>As<a href="https://www.bloomberg.com/news/articles/2017-07-10/secret-millions-for-0x00a651d43b6e209f5ada45a35f92efc0de3a5184"> Bloomberg</a> so astutely observes, the growing number of wealthy crypto investors is starting to infuriate regulators, who are now calling for more transparency in the cryptocurrency market. Specifically, they&rsquo;re arguing that it&rsquo;s time for cryptocurrency wallets to include information that might help identify users.</strong> Otherwise - they say - the continued association with criminality &ndash; cemented by the Dread Pirate Roberts&rsquo;s life sentence &ndash; could start to impact the crypto-asset market which now has an aggregate valuation approaching McDonald&rsquo;s Corp.</p>
<p>Others, like the purported owner of Ethereum wallet <a href="https://etherscan.io/address/0x00a651d43b6e209f5ada45a35f92efc0de3a5184"><strong>0x00A651D43B6e209F5Ada45A35F92EFC0De3A5184,</strong></a> which holds 680,000 ether tokens, worth about $150 million at present prices but nearly twice that when ether was trading at its mid-June highs, have a different definition of transparency. Some one alleging to be the accounts owner penned an instagram post bragging about their gains in the middle of ether's June rally.</p>
<p><a href="http://www.zerohedge.com/sites/default/files/images/user245717/imageroot/2017/2017.07.10ethereum.JPG"><img src="http://www.zerohedge.com/sites/default/files/images/user245717/imageroot/2017/2017.07.10ethereum_0.JPG" style="width: 500px; height: 301px;" /></a></p>
<blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>&ldquo;I get many private messages asking how much ether I have,&rdquo;</strong> the post read, alongside photos that purported to be the hardware powering a mining operation but looked lifted from another website.</p>
<p>&nbsp;</p>
<p>&ldquo;One of the cool things about Ethereum is that all wallets around the world are transparent and open for everyone to see. And this is my wallet&rsquo;s savings.&rdquo;</p>
</blockquote>
<p>That trader is probably not in such high spirits today, with ethereum down 8% in recent trade:</p>
<p><a href="http://www.zerohedge.com/sites/default/files/images/user245717/imageroot/2017/2017.07.10Eth.JPG"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user245717/imageroot/2017/2017.07.10Eth_0.JPG" style="width: 500px; height: 283px;" /></a></p>
<p>While bitcoin&rsquo;s popularity has been, in part, contingent on these privacy features, regulators see them as a threat that can aid tax cheats and criminals. Here&rsquo;s <a href="https://www.bloomberg.com/news/articles/2017-07-10/secret-millions-for-0x00a651d43b6e209f5ada45a35f92efc0de3a5184">Bloomberg,</a> making the regulators&rsquo; case for them:</p>
<blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>&ldquo;That&rsquo;s not to say that <a href="https://etherscan.io/address/0x00a651d43b6e209f5ada45a35f92efc0de3a5184">0x00A651D43B6e209F5Ada45A35F92EFC0De3A5184</a> or any other entities are doing anything illegal. But opacity may be worsening jagged price movements.</strong> The value of ether, for example, rose from about $8 a unit at the start of the year to crest at $400 in June before settling around $250 today. A lack of transparency could also be stifling the mainstreaming of online money, according to draft legislation issued by the European Parliament in March.</p>
<p>&nbsp;</p>
<p><strong>&ldquo;The credibility of virtual currencies will not rise if they are used for criminal purposes,&rdquo;</strong> the draft said. &ldquo;In this context, anonymity will become more a hindrance than an asset for virtual currencies&rdquo; and their potential future popularity.&rdquo;</p>
</blockquote>
<p>it's no wonder reguators are becoming more interested in identifying owners of crypto assets: Thanks to the explosive rallies in cryptocurrencies this year, the ranks of the crypto millionaires are growing.</p>
<blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;<strong>The current value of all the ether held, $23 billion, means dozens of electronic wallets have accrued nine-figure positions.</strong> Many of them could be held by individuals, according to a Bloomberg analysis. Individuals can hold multiple wallets.&rdquo;</p>
</blockquote>
<p>Furthermore, it&rsquo;s likely that the first crypto billionaires have been minted by now: Candidates include hedge fund manager Michael Novogratz, Joseph Lubin, founder of ConsenSys, a blockchain production studio that works on Ethereum, and Ethereum creator [Vitalik] Buterin.</p>
<blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;<strong>Novogratz, a former executive at Fortress Investment Group and Goldman Sachs Group Inc., has a long way to go, but he&rsquo;s been a consistent booster. </strong>He said last month that he has 10 percent of his net worth invested in virtual money. That&rsquo;s a stake worth at least $90 million, given a net worth calculated at $925 million, according to the Bloomberg Billionaires Index. Novogratz declined to comment.</p>
<p>&nbsp;</p>
<p><strong>Cryptocurrencies could become a $5 trillion industry, but they need to develop sound business principles to satisfy regulators and lend legitimacy, Novogratz said June 27 at a fintech conference in New York.</strong></p>
<p><strong>Lubin, the former chief operating officer for Ethereum Switzerland GmbH, which developed the software, could hold hundreds of millions of dollars&rsquo; worth of ether, several investors said. </strong>The Canadian entrepreneur didn&rsquo;t respond to requests for comment on his holdings.</p>
<p>&nbsp;</p>
<p><strong>&lsquo;The long-range vision is moving the fundamental transactional elements of our society from analog, friction-filled systems to natively digital frictionless systems,&rsquo;</strong> Lubin told Bloomberg Radio June 21.</p>
<p><strong>Buterin said in a Reddit post last month his ether holdings equal what would amount to about $117 million today</strong>, according to calculations by Bloomberg.&rdquo;</p>
</blockquote>
<p>Regulators&rsquo; push to unmask holders of bitcoin and Ethereum will likely succeed, but ironically, they could end up destroying &ndash; or at the very least damaging &ndash; the very assets they seek to tax: Outing users of one crypto asset will just boost demand for coins with enhanced privacy features like monero and zcash.</p>
<p>What then? I guess the authorities will just need to start over.</p>


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