Investing in cryptocurrencies is in vogue now! The enthusiasm is only growing, as people become more addicted to everything digital. Even the risks linked to dealings in the virtual world, fail to faze them! It is why a concerned USA is keen to spread awareness about the risks associated with digital currency and trading.
The Awareness Campaign
For now, digital assets are in residence in the virtual world. They are integral to the online financial system. However, governments are trying to move them to the mainstream, that is, the real world too. Technological advancements are making it all too possible and easy.
This should lure more people towards investing in cryptocurrencies. The attraction is that several people have managed to become millionaires, over the years. Therefore, a concerned U.S. Treasury Department is keen to provide U.S. citizens with an education in cryptocurrencies.
Leaders of the Campaign
The dissemination of knowledge will be taken up by the Financial Literacy Education Commission. This department belongs to the U.S. Treasury Department. The Commission will create educational materials covering all aspects of the world of digital currencies.
It will also create outlets, wherein the public may access the materials. The idea is to clearly differentiate between other modes of payment and digital currencies.
The U.S. Treasury Department’s education unit is well staffed. There are 20 different agencies, including the Securities and Exchange Commission, belonging to it. They can successfully handle the campaign across the U.S.
According to the Treasury Undersecretary for Domestic Finance, Nellie Liang, the educators hope to reach out to specific populations, first. One of them consists of people, who have restricted access to financial services in the real world. Such individuals will be keener than others are, to invest in cryptos.
Reasons for the Campaign
The snag is that the investors/purchasers may not truly be aware of the complexities associated with digital assets. Then again, they may have only vague ideas about regulations linked to the crypto arena. Therefore, the Commission hopes to fill in the gaps. The reason is that bad dealings and losses tend to influence the entire financial system, albeit in a negative way.
Another reason is the growing popularity amongst both, novices, and experts, to experiment with cryptocurrencies and digital assets. Over 14% of North Americans had entered the virtual marketplace by year end, in 2021.
This was confirmed by a survey undertaken by the University of Chicago. As for the value of digital currencies, it had crossed $3 trillion.
Ordinary people emulate extraordinary individuals. The extraordinary here refers to sportspersons, movie celebrities, successful business owners, etc.
The crypto world thrives on anonymity. Therefore, even the most advanced of technologies are unable to trace cybercriminals. It is why the U.S. Treasury Department wishes to create large-scale awareness. People are welcome to invest in cryptos, albeit in an informed manner.
Legal Risks Associated with Digital Currencies
It is possible to get into trouble with the law/authorities if care is not taken to keep track of legalities associated with cryptocurrency dealings.
- Taxes –Many governments tax cryptocurrency holdings. The laws change too, whether frequently, or infrequently. It is up to the investor to keep track of the latest pronouncements.
- The Internal Revenue Service (IRS) in the U.S., views digital currencies as property. Therefore, investors must pay Capital Gains tax. In other words, they must provide detailed reports of their gains and expenditure, when filing income tax returns. It does not matter where they made their purchases.
- In case, employees of an organization receive cryptos as salary, they must consider it as income. Therefore, they must pay income tax, albeit considering the value of the digital currencies in U.S. dollars.
- Sometimes, overseas trading involves holding cryptos in foreign accounts. U.S. citizens need not expose details of these foreign accounts to FinCEN, for they do not fall under the category of reportable accounts. FinCEN refers to Financial Crimes Enforcement Network. The U.S. Treasury Department controls the activities of FinCEN.
- However, those who hoard cryptos, and own substantial overseas accounts, must let the U.S. Treasury Department know about it. They must present FBAR (Foreign Bank Account Report). The details go onto FinCEN Form 114.