In the crypto ecosystem, stuff just shows up, you know, just air drops happen, and you're like, I didn't want this until you kind of get this question. I didn't even know I got it eeo, and now I have income I didn't know I had those through a little bit. I think, like I said, objectively can look at taxl and say, hey, the tax alaw kind of says this is the outcome. Now there's a different question about like, yeah, is there maybe a policy discussion we had
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more about Uphold, please visit the link in the description. Welcome to the Thinking Crypto Podcast, your home for cryptocurrency news and interviews. With me today is Miles Fuller, who's the senior director of Government Solutions at Taxbit. Miles, great to have you on. Yeah, thanks for having me, Miles.
I've been a user of tax bit for years when you guys are more consumed focus, so I'm very familiar with the product and we're going to talk a bit about you know, tax bit and as well as what the IRS is doing with crypto. But tell us about yourself, your background. I know you spent some time with the IRS. Yeah, sure, so my background I did. I came out of school. My background from educationally is
finance economics. That's kind of where I started. But then I went to law school, came out of law school, landed a job as a lawyer for the IRS. So like two things people don't want to hear about being a lawyer working for the IRS, but I did that for fifteen or sixteen years, and I did. IRS. Lawyers kind of come in two flavors.
There's normally one that's the Washington d C type rights like rights, guidance, rights regulations, that stuff, and then there's the kind that's out in the field working with examiners and doing stuff and doing litigation for the IRS. I was the latter. I was in the field doing stuff. But through that job is where i've kind of I used to tackle a lot of abusive tax stuff, but and I got to know a lot of people. But
through that is where I kind of came first in contact with crypto. Although it wasn't through tax, it was more of doing investigations the IRS does relating to anti money laundering that kind of stuff, And through that I had someone I know. They reached out and they're like, Hey, we got this thing we're doing and involves this thing called bitcoin. Do you anything about that? And I'm always happy for a challenge, So I was like, I'm not sure, I know a little bit, but let me get in.
And that was like seven or eight years ago, and now here we are. Wow. And was your first entry into the crypto industry via taxbit? Yes? So officially so well through the IRS side, but to the actual industry side was through Taxbit. I was at the IRS and I came over. You may know the history there. Obviously, tax Bit does calculation related stuff. You sound like you're a customer of that service. We had for
years. The IRS sort of had the same problem, right They were doing investigations, They started doing examinations of people that had it, and they needed
assistance doing those calculations. They sought out a couple vendors that they could test run, and they ultimately awarded a contract to tax Fit through that on tract I got to know the folks at Taxment very well, and I liked what they were doing, and I liked their their approach to the ecosystem and trying to go grow the ecosystem in a positive way and became friends with them and
opted to jump jump ship and help them kind of grow their company. So, Miles, I hope you don't mind me asking what was like the most egregious thing you saw at the I R S as it relates to crypto. Was it just people not trying to pay their capital gains or they're you know, trying to put into stable coins and not report it. What wasn't the most egregious thing you saw? Yeah, I think I think it was probably
the first thing there was. It's weird because this is where you know, people in the crypto space get a bad I said, kind of a bad rap. There's definitely people in the crypto space that are that are doing bad things. But there's people in all financial spaces doing bad things of course, so but in the crypto space, yeah, I think early on there would
be some people who just weren't paying taxes. And it's hard because you would talk to people and you really try to figure out when you talk to them, like, Okay, you're not pain because you know you're supposed to be paying and you're not paying, or are you're just not paying because you legitimately are confused about like Okay, what's the rules here, or I can't get
the data together to like do it accurately. But yeah, we did see some very I came across a few very high dollar ones where it's like, Okay, you you made a lot a lot of money, you probably knew you needed to report something, but but yeah, it's it's interesting because there's a but I think there's a lot of a lot, like a lot of forgiveness there because there are people who are trying to do it right and they're like, hey, I'm trying to do this, but I don't have all
the right data and I can't get the like it to work out correctly. So just kind of bear with me here. And I my experience was the IRS a lot of times was somewhat forgiving, like people are trying to do it right. The IRS understood the problems with data problems that still sort of exist today, and so they would sort of try to work with people and talk through and as long as everyone was on the same state of like,
look, we're trying to get to the right answer. We're trying to pay a taxis accuratey, let's just figure it out, and that was a good approach. Well, that's good to hear that the irs was forgiving because this was all new for everybody, whether you're in government or you're just a retail investor or institution. And that's where I guess tax Bit comes in, which is trying to help make that simpler. If you can give us an overview
tax bit in the services, Yeah, for sure. So as you mentioned, if you were a customer for a long time, tax Bit started off like six years or so. Now the main focus was helping individual taxpayers just be able to crunch their numbers, get them on a tax return with respect to crypto, whether that was centralized exchanges or on change activity. We recently exited that space to sort of move the company a little bit away from that,
and we've refocused the company. And this actually was I think the original founders of our company that it was one of their ideas at the beginning was not always to be in that retail investor space. But knowing that, hey, look, this doesn't make sense. Why is crypto the only asset where you don't get some sort of at the end of the year, you don't get something from the service you're using. That kind of tells you this is what you need to put on your tax return. I mean, is what
you get in TRADFI. You'll get your statements at the end of the year, says hey, just put this information on your tax return. So they saw that years ago and reached out and wanted to start working with exchanges and
stuff to enable that type of reporting for customers. Is like a customer service element, and they've been doing that for a long time, and then ultimately the government kind of caught up and now there's rules that are supposed to be coming into place the next year or two for that precisely think and so tax bit is really refocused its effort on enabling that type of reporting to make sure people are able to do their taxes correctly. Now, in addition to that
tax side stuff, taxbit also does financial accounting services. So if you're a company that has crypto on your balance sheet, you need to report either internally or externally. Re enable that type of reporting. And then finally, the place like based on my title, right, sid is on the government side. And so like I said, tax bit has this stuff where our software helps enable the government to be able to do these calculations when they're doing examinations
and stuff, and that's sort of the part of the company overseas. So those are our main three areas today. We've kind of moved out of the consumer space a little bit. And what do you guys have planned for this year? You know, are there any special initiatives or is just you know, continue to grow the business. I think it's just continued to grow the business, and it's trying to just keep engaging customers and getting customers ready.
On the enterprise side, there's a lot of brokers. There's these regulations that are I'm going to say in flux there's proposed regulations, but they haven't been finalized yet, and the goal is just trying to keep in communication with our customers there on like okay, here's what's coming, keep them updated, to help them build to be ready to implement those regulations when they go into effect. And then on the government side, yeah, it's just trying to keep
We're actually expanding into the European area. We just recently hired a head of operations over in Europe, so we're working with some European governments and European exchanges to expand over in that part of the world as well. Now you mentioned some proposed regulations and rules around taxes for crypto. There was some crypto tax reporting requirements proposed by the Treasury last year. Can you tell us about that. What are the details there and when do you think that might go into
effect? Okay, so, yeah, the details there. So those the proposed regulations that came out last fall actually were the result of a law that Congress passed all the way back in twenty twenty one. And that law was passed and the concept of that law is really to make the crypto space a little more analogous from what we would call in a tax space tax information reporting.
The way I describe that to people is like I would think about, hey, you get a W two from your employer that says, hey, this is what you got as a salary, or if you do traditional investments, you know you might Merrill Lynch or Charles Schwab. At the end of the year, it gives you that ten ninety nine document that says, hey, this is the stocks you bought and sold. So it's that kind of
that's tax information reporting. It helps the taxpayer get information know what to put on their tax return, so it can be accurate, and then it helps the irs see the same information so they can say like, hey, this is this just like check the box, like they did this right. It's good. We don't have to bother people. So that's what Congress was after. The problem is crypto is a little bit different, Like you know,
there's different data elements there and the functionality and crypto's difference. Right, it's easy to bounce units of an asset around from exchange one to exchange two to a personal like on chain wallet, so you have this slightly different stuff. And that's why Treasure I think took a little bit of time to get those proposed regulations out. They were trying to get their head around about, Okay,
how's this really going to work? So those are out. The proposed rigs indicate that they would go into effect for the twenty twenty five tax here, So it means at the end of twenty twenty five, early twenty twenty six is when you would get those returns, like those information returns relating D twenty twenty five, So you'd be able to get your twenty twenty five taxes
more accurate than what you may be doing today. But they haven't been finalized yet, so everyone's waiting for them to be finalized with what the rules are going to be. And so that's kind of what's on the rise. And now that's going to let people know like hey, if I bought bitcoin at a certain price and re sold it at a different price, this is my gain or loss. That's the kind of information they're looking for, as well
as if you move something. And there's some stuff that's not covered by the rakes today, but conceptually it would be like oh, if Miles had something on an exchange. So the way they're doing this is what they're calling brokers. We think for us most most of the reality is most of that's going to be like your coin bases, your crackings, you're geminized sort of centralized
exchanges. But the other concept there is if I have something there and I move it to my personal wallet, they're gonna I'm gonna get in some information about like, hey, what was the cost basis of that, so I know into the irs knows. So then if I sell it for my personal wallet, maybe you and I meet up at Starbucks and we do ap peer to peer exchange or something, you know, we have the right information that we can report accurately and the IRS can say, Okay, we don't have
to bother those people's that's kind of what they're after. But that's it's twenty twenty five is the first year, and then there's some additional reporting they're getting, like a little more granular level reporting that would go into effect in twenty twenty six, so you get that in twenty twenty seven, so they're kind
of phasing it in a little bit. So do you think they're going to retroactively go after people who maybe didn't do miss somebody steps like you said, like you and I met out, but maybe you know there's something called local bitcoins, right or local bitcoin and you know we exchange. Uh, do you think the IRUs is going to go after you know, years of misreporting?
I don't know generally, So from when you think about, like from an IRS examination standpoint, generally, if you file your tax fiaturing, the IRS actually only has three years to go back. That's like sort of the standard rule. Now, there are some exceptions to that rule. There's always exceptions to every rule, but generally that's it. And in this space, I don't you know, it's hard to see what you know, to get
your head around like the IRS is gonna do. I think when they go in effect, they're gonna have a lot on their plate anyway, so they're not necessarily they're not gonna make My prediction would be they're not gonna make like some sort of targeted effort. But as they stumble into people, I tend to think like if they if they stumble with someone in sort of in more current years and the IRIS. Keep mind, the IRS always exudits people in
arrears, right you know, it's like this is twenty twenty four. They're probably doing audits to people right now, twenty twenty one or something that's you know, because they always they're not they're not as fast as what you might think they are. But in the those situations they might be doing, you know, doing an audit, say of like, hey we're doing an audit of someone and it seems like they didn't report, and then they might say,
okay, well you're not reporting this year. Then we'll start going back, you know, we'll go back and to see if you didn't report in priors. But again, they're still oftentimes blocked by this what we call like
a statute limitation. They can only go back so far. But I also think there's gonna be some shift, Like I think the IRS has an understanding that this information reporting coming online is going to have an impact where people who might have been using tools like our tax bit consumer tool that we have that
you're familiar with, or some of the other ones out there. There may be some discrepancies, but what those tools we're doing versus what this information is showing now, and so they're cognizant of that, I think, and that's going to help. You know, there'll be some smoothing out. I might call it a little bit of grace given where like, Okay, everyone's getting
in line, just me this shift into this new reporting regime. I don't know if you can give share any thoughts on this, but I know one of the complications within cryptos, for example, like free air drops and how that is counted towards income even let's say you don't cash it out. What are your thoughts on that and how the I R S may treat that.
Yeah, so the current rule. The IRS actually put out guidance on this some years ago that essentially said that if you're you get an air drop of some sort, that's that's I'm gonna just describe it as a gratuitous receipt of property. And from a peer tax standpoint, the gratuitous receipt of property is income. Like if I showed up, you know, it seems a little silly at a low level, but it's like if I showed up and dropped on your lap, you know, a twelve pack of beer, that's you
know, that's you got income. Now, no one cares about the value of a twelve pack of beer, Like, no one's really worried about that. And maybe it's a gift, which then has its own rule that would say like, hey, it's exempted from being taxable. But that's the IRS's approach. Just from a peer like objective legal analysis, they say, hey, look you got something if it had value. And so this is where I like, I try to break this conversation down though with people into kind
of two parts. The first step is, hey, you got something gratuitously given to you, and it wasn't necessarily a gift. Like the reason you're getting air drops is it's like a marketing thing, right. They're giving you the air drop because they want you to get on the network. They want you use the token. It's not a gift. It's really kind of done for a business intent. So at that moment, you're like, Okay, you got something. It is income under the tax code. The second question,
though, is what's the value of that income. What's the value of that air drop. Now there's a lot like we hear about scampoins and other stuff going on, Like there's a lot of stuff. You get the value zero, so you can say, hey, I got income. I got this thing that's income under the tax code, but it was income of zero, like it was worth nothing. Now you do have stuff though in what
you hear I maybe what we're talking about. You get a lot of people in my mind that are like, well, yeah, but I got this thing. It was worth one hundred dollars at the moment I got it, So the IRIS is saying, I got to take it into income. I got one hundred dollars, or maybe I have lots of units and maybe it's one thousand dollars whatever it is. But then like a week later, it was worth zero. So now I like, ad this thing and then we're
zero, And that's a tough like I think the IRS appreciates that. But this is where I told you, like my background's like economics, you whatever. Like, well, but if when you got it and it was worth one hundred dollars or one thousand dollars, if you pulled the trigger and liquidated it or sold it, you would have had the thousand dollars. Like you kind of get this question, people like you didn't sell it because you were holding it as in it like you wanted it to go up in value.
You maybe didn't do it. So that's like there's a rub there, and it's hard because it's a novel thing because in unlike other situations where you might get free, you usually I think one thing people bring up is usually when I get some sort of free thing, it's because I, like put my name into a raffle or I did I took some steps to get it. In the in the crypto ecosystem, stuff just shows up, you know, just air drops happened, and you're like, I didn't I didn't want this
until you kind of get this question. I didn't even know I got it, you know, and now I have income I didn't know I had. Those are a little bit I think, like like I said, objectively, you can look at tax and say, hey, the tax lock says this is the outcome. Now there's a different question about like, yeah, is there maybe a policy discussion to be had about is that the right answer? Should the law be augmented a little bit to accommodate some of this stuff?
And that's kind of a different question that policy makers should have or people should, you know, talk to you. You'll write your congressman kind of thing and say I don't know that this is really fair, but yeah, that ends up being what it is. But the reality is, yeah, if you got it, it's worth a lot of money, Like you could sell it right away that I always ad buys God, Like, hey, if you're not sure about it and you get it and it's worth money, you
have to take an income, like sell it, give it cash. Yeah, absolutely agree, Because I've gotten free air drops and I'm like, what the hell I didn't participate it is but just because I held the token of a native chain, they air automatically air dropped it. I'm like, okay, whatever, but you know, is it that the irs? Maybe the balance of this is a certain threshold if you get x amount of tokens valued at well valued at x amount kind of like the six hundred dollars rule.
Right, you get a report, then it becomes a taxable event. But maybe if you got forty bucks of something like, do I really need to be tax for that reported to the irs? Yeah, And so what you're looking at as like a diminished murule. Now you mentioned the six hundred dollars thing. The six hundred dollars it's like weird because that becomes the cross section of two elements of the tax world. So there's tax like what you and I as taxpayers, we file our Form ten forty with the federal government.
We put everything on. Conceptually, we file our form ten forty. We're supposed to put everything on it without limitation. The information return stuff we were discussing is where well, if it's less than six hundred dollars, the person that paid it from me is excused from giving me that information return because it's it's like a pain in the butt to do it. So that like the
discrepancy. But you do raise a very good point about for people like you and I, like as individual taxpayers, is there kind of this back to my example with you about like, hey, if I gave you a twelve pack of beer, would you really be putting the twelve pack of beer value on your tax return. Probably not. So I think there is a reality there that if if as an individual and you know, I'd never you know,
yes, you're supposed to be complying or whatever. But I also think there's a reality that like, hey, if you during the year got some arror drops and they were worth like forty fifty sixty bucks and you you fail to put them on the tax return, the irs is probably not. They're not chasing you down, like that's not worth their effort. You know that they would go through and because it's what's the tax on the forty or fifty
bucks? You know they're interested in some of these, you know, larger ones that you hear people you know you did air drop, I got all these units. It was like two three, four thousand dollars worth. You know, that's what they're looking for. And the other thing though, to keep in mind, we have this conversation about if if you take it into income, then that actually that value that you took an income and paid tax
on then does establish your cost basis in those units. So later if you do sell them and they went up in value, you know you're only paying tax on the difference between the income and the higher value, or if they go down in value, you actually you know you're going to deduct like a capital loss. You can say I took an income, but I lost money now on them. So that's something people also, I think sometimes forget about. It's like no, no, when you pay the income, you get
established like value in those coins. So then you can take advantage that for tax purposes, because the IRS isn't trying to double TAXI, they are just trying to capture tax at the moment in time it happens. Yeah. I mean, look, I don't envy what the IRS has to do here. It's complicated, man, there's so many layers and just a brave new world with all these different ways to move into different currencies and digital current assets of
value and so forth. And then the other aspect I think some people are still trying to figure out, is okay if I cash out. Let's say I sell some bitcoin, but I put it in stable coins versus fiont. I still have to report that. But I don't know how does that all work? Right? Because what if the stable coin goes down or it gets deepagged, like there's so many layers to this. Yeah, and I think actually you touched on a very good point. I think it's easy to tackle
it at thinking of at a more like general level. And it's what happened to people come out and say, oh, the Irs, you know, classified crypto as property, and that's like true, but I think that kind of misses the point a little bit. Really. What the IRS said is like, hey, look in the tax code, there's rules that deal with certain things. So cash, the cash in your pocket, it's actually property, right, It's just piece of paper. It's got some value because the
government says it has value. So that's like fiat. But cash is a special type of property under the tax code that has special treatments. And then you have stocks like securities, they're also a special type of property that has a special treatment under the tax code. Same with commodities. So all the IRS did was come out and say like, hey, all of these things are property. Crypto is also property. It just isn't one of these other
properties, at least not yet. Maybe someday, right, like maybe things will change a little bit. But that's where the starting point is for the question you have, is like, Okay, it's property. So I have the bitcoin, it's property. I'm gonna sell it or trade it perhaps from a bit from units of bitcoin into a stable coin. And then you're like, okay, now I got stable coin. Well, stable coin isn't technically
cash, so it's still this property thing. So now if I'm selling, like I bought the stable coin for one thousand dollars, I got thousand units of some some tether or USDC or something, and then I'm holding that forever and then I sell it and it's still one thousand dollars. But now you're telling me I got to like put all this on my tax return, but I didn't make any money on the thing. And that's like a very interesting
question. So for me, I've seen both sides that, because I've seen people with the exact like thousand dollars they're like, why do I have to put all this on my tax return? Like I didn't make any money on it. And it's hard because there is I would describe as what I call like a misalignment, like if you don't really have any gainer loss, maybe there is a way to say, like, hey, if it's this this low level of gainer loss, like you don't actually have to put it on
the tax return. The trade off is I've been in the space long enough and done enough cases in including people like doing tax returns and stuff or helping
the IRS. On the IRS side, there are people that are arbitrage trade you know, stable coins, so like you mentioned, they come off the peg and you get arbitrage traders who even though they got their thousand dollars at USDC, but maybe they're doing all these transactions back and forth, but they're actually making money, and so the IRS is like, well, you're making
money, you need to be reporting it then. So that's that's where you hit like a little bit of a rub that creates like an uncertainty about stuff, and this is something that's coming up. One of the big questions in these regulations we talked about was whether or not all these brokers are going to have to report about the stable coin like the sales, because that's just voluminous.
You know, people that might be doing stuff that has very minimal tax impact because hey, they bought them then a thousand, they sold them in a thousand. Why am I reporting about all that? Just creating paper so
to speak. And that's something that I think the Treasury Department got a lot of feedback from people about that, and maybe that's an area where I think they the Trade Department's trying to reconsider, like Okay, maybe there will be some sort of deminimous thing, like hey, if the gain on some transactions super deminimus, you actually don't have to have to report it on the information return stuff, So that that could be in the works. Because you raise
a very good point, there's it's a lot. And the last part all add to that is people do say, like, well, why aren't you know stable coins are like currencies. Why aren't they just treated like currency. The difficulty we have in these here in the United States is there is a federal statute that defines, like the legal tender of the United States, you know, is the coinage in the dollar notes. It's under Title thirty one. It says it's these things. And only until that law could change would
you ever be able to include other like crypto related stuff in there. So, you know, some of Congress changed that law. I don't know if it would change. But that's where people get hung up. They're like, well, no, these just function like currency. Dents Like yeah, but there's a law that says like currency in the United States, is this stuff specifically? Yeah, I mean, and to your point, a lot of these things are still up in the year. Congress is trying to figure out.
There's a couple of bills in the House yesterday that was a hearing with the Senate Bank can come in and the Treasury crypto was brought up. I know, folks like Elizabeth Warren want to have AML on nodes and validators, and then you know the reporting requirements. I remember going back to the Infrastructure bill. So it's there's a lot of back and forth, a lot of battling here. So hopefully, man, we can get some of these things clarified, because it's a bit messy right now. Yeah, I think one
hundred percent. I think the first place, and there's been a bill floating run for you years, a broader you know, sort of regulatory bill, so less tax specific but more just big picture, and it's maybe setting up some frameworks for a couple of different things. One is you hear a lot in the news lately, you know, sort of the debate there was just a few weeks out, you know, court there's this litigation between the SEC
and coinbase and court ruled on a motion that coinbase is filed. And so first thing is like in Congress to maybe like, hey, maybe we need some broader regulatory framework that's helping decide like when is when is a cryptocurrency or crypto asset like fit in the securities bucket or the commodities bucket or whatever, and then you know, and then even then but in that same vein there's also things like stable coins. What bucket do they fit in? Because that's
more if you really think they operate more like a currency. That really puts it more under like banking whatever you know, control or currency kind of stuff and how those rule works and what are the rules because I get nervous. We talk to people about stable coins and you know, you hear about, okay, there's asset back stable coins. So that's like your USDC and your tether and stuff that are like peg one to one, but there's actually like
dollars or assets behind them. The other side in the ecosystem, we talk about stable coins and you think like like Luna, like tea Luna, where it's like an algorithmic stable coin which isn't backed by anything, and so that's where you do get a little bit of like the Elizabeth Warren types that consumer protection. Right, you want people buying these things thinking, oh, this is just a stable coin. It's cool, it's I'm going to get my
money out and then have it. There's like nothing behind it. So some clarity for that, which is really focused on like a consumer investor protection kind of thing, would be helpful as well, so people know what they're into. Yeah, we definite, absolutely need that balance. We're protecting consumers but also not stifling the innovation. And I know there's people on both sides of this the spectrum here, but it's it's the balance regulations meeting in the middle
of the roads. Hopefully they can get that iron dot soon. Do you think the i r s will integrate I don't know, AI or blockchain. This is a tough question, and maybe to help them manage all these things and to keep up with it and to you know, enter this new tech
revolution that's happening. Yes, definitely. I think the first step of those types of technologies, I think the I r s would move probably first into maybe like the AI realm before they went into peer like distribute ledger technology to do stuff they could There could be away from a tax accounting like you and I. You know, every year we file taxes, we actually have the IRS runs some huge database that tracks like every year, like you know,
what's my tax would I pay? How much money they give me back or how much money to have to pay at the end of the year, Like think like an accounting ledger. They maintain that for every taxpayer out there. So there's a way we think about distributed ledger technology. Maybe there would be a way that they could take it and move it there, make it. You know, you get worried about privacy rights though. Tax information is a very protected thing here in the United States, but maybe you have some way
of making it not visible. But you or I could go look at our own information very easily, much easier than what we do today. That could be one option. I think that's kind of far off. I think the first step the IRS would take and be moving more into the AI stuff to really try to automate some of their processes. One of the things they iras struggle with is you know, I think all governments they have very limited resources.
You know, they always have more work than what they could get through, So they're probably always looking ways to be more efficient and how they do stuff. And one of the areas that they struggle with is like they want to if someone's not paying their taxes, they want to identify who are those
people? And most people you want to go out, you don't want to identify and do an audit of someone who actually paid all their taxes, Like that's annoying to that person and then b that's a waste of IRS resources. So I think that's where the IRS maybe is looking at from an analytics side, like how could AI and machine learning be used to make better decisions about
stuff? And so I could see that step coming first. You know, it's fascinating As you're saying that, I was thinking about the other conversations I've had with digital identity on the blockchain and CBDCs and digital identity, you know, tying into your driver's license, you're voting and then all that, which which is not a bad thing, but you know people are worried, like you know, there might be a dystopian feature with CBDCs, and but it
would make sense if all of this is running on the blockchain where you don't have to jump through all these hoops, but it's easily accessible I can go view my tax information straight from the IRS. Because I have my digital identity, I can easily verify it. But also if I'm spending that digital dollar CBDC, they can easily track everything I'm doing, and the and the and
the right to privacies of what people are concerned about. Yeah, and like you mentioned, it becomes like a balancing act at the policy maker level of like what what level of like technology related efficiencies do we want achieve or to how to simplify things? But then how do we what's the trade off between that and things like privacy rights like this? This becomes a very like a
big question. And I do think digital identity stuff could be happy. CBDCs are an interesting thing in my mind, and I you know, people have different views, but at some level on CBDCs, there's this idea I in my head and this is the economist kind of part of me coming out. It's like, well, if that happened, if that ever happened from the government, like, it probably would look very different than how we see the bitcoin network or something. It would be be this idea like a like bitcoin
network being sort of totally open source. Anybody can hop on the network, and run a node to validate transactions, you know, proof of work, you know, to compete to do it, Like I don't if they did CBDCs. I don't know if someone wants to put their entire or financial legal tender system out where you could have foreign governments or whatever trying to run run
notes and disrupt transactions. So I think the structure of that type of distributed ledger would look totally different than what as we understand currently like how most distributed ledgers or blockchains run. But it could be there. But then then there is and then with that there is the visibility of the ledger, which is the question you raise. It's like what we really want the rs going to look at like all, like they can't see all my cash stuff. I
this morning, I'm in New York. I went down the street bought a bagel coffee. Like no one knows that that how Like I just paid them. They have their cash register, they have it, but no one's tracking my cash that I just pulled out of my pocket and paid the person. That's a like a weird thing to think, like someone could be monitoring what I'm doing. That raises some interesting questions. Yeah, obviously a big debate
happening. There's political candidates, there's members of Congress who put out bills, you know, trying to block the FED from doing certain things. But it's tbd right to see how are they going to roll out these things and if it's going to align to the Constitution and our right to privacy. So what, We'll have to wait and see, But at least we have alternatives and Bitcoin and these other cryptocurrencies. Speaking of Bitcoin, I would love to get
your thoughts on the bitcoins boty TF launch. That was certainly a landmark moment for the crypto industry, even though we had to beat the SEC in court for this, but nevertheless, all of Wall Street is here. What are your thoughts on that? No, I think I think it's huge and it's gonna be a mass push because I do think somewhere from an investment standpoint, there's sort of a subset of people that have been tinkering with buying and engaging
in the crypto ecosystem. Uh, the the sort of reaching that point where now we have, you know, an ETF that's available to really every day investors. You know that you could go to your your Merrill lynch or Charles Schwab and be able to buy in these ets. That's gonna be huge for adoption and also I think huge then for acceptance and people seem like, Okay, hey, what is this thing? Let me get more engaged. So it's super interesting. People ask questions like, oh, what's the tax impact
to that? And I'm like, well, at that point, you're really you're you're you're buying an ETF, You're not buying bitcoin, so you're really looking at the tax treatment of ETF as an investment vehicle, which could come in a couple of different flavors. And I think even even right now it's
not totally clear how they're going to do that reporting. Uh there's two kind of buckets and ETFs, but it's you're you're getting closer, you're getting it out there, and you're making it more more easily or readily available to the public at large. You know, they don't have to go to coinbase now or Gemini even, or they don't have to get some like a meta mask
wallet and start doing squabs. They can just basically go right to their local broker that they've used where they got retirement accounts at or something and be able to get access to investing in bitcoins. So that's that's a huge step I think for sure. Miles. I'm gonna ask you a weird question here because it's something my own personal feelings, but you may feel different because some one who worked at the IRS. I feel like capital gains taxes are just wrong.
It's highway robbery by the government because like, I take my already tax dollars and I invest it, I make a gain, and the government comes and takes twenty thirty percent. You know, depending on your income bracket. Do you think there's ever a chance that that capital gains goes away or gets reduced? I would, I don't know that there's ever a chance. Yeah, my speculation is probably not a chance that's ever going to go away. I will say this, keep them on like you do capital gains tax Yeah.
The goal there is that the IRS is taking, not like and this is back to this question of double taxation. It's like you've taken your one hundred dollars, you've made you pay tax on your harder money, and then you take it and you invest it in something well, and then later when you exit out of your investment, that's the moment that triggers capital gain.
Right, you got to exit or dispose of your investment, you're only paying tax on the delta, right, You're only paying tax, Like if you started with one hundred and now it's worth two hundred, you're only or maybe that's a bad example, like one hundred and no ounce worth one hundred and fifty, but you're only paying tax on that extra fifty. You're paying tax
on one hundred again, So that's something to keep in mind. What's interesting is capital gain tax as we understand it today, which is sort of bifurcated in a way. Right, if you have your investment, if you're engaged in that investment in less than a year, the income you make from that investment, that gain that we talk about, is actually subjected to your ordinary tax rate, same tax rate your salary or whatever wages might be taxed at.
However, if you hold that investment for over a year, it's going to be taxed at what we call preferential rates, so it's tax at the lower like the fifteen percent rate. There's some other things that go in there that could go a little bit up because there's some other surch charge kind of taxes that come in but just generally people think bad. So what's interesting historically is that fifteen percent rate hasn't been around for as long like it's probably only
trying to remember the date. I think it's like the late nineties, Like that preferential rate came into play, not super long ago, and it was an idea to push people into investing, to give them that tax break. And where you're going is like, is there a way to give that tax break even bigger? Like how do we get it even lower? Which actually is isn't a bad idea. I think it's weird because you hear a lot of news and that's that's a bigger tax policy question, right, like what
sort of behavior do we want to incentivize by our population? Do we want them to like invest stuff? And the way we get them to invest is maybe reducing taxes. The flip side is there's people that say, hey, low, lower income or marginalized people, they don't have the extra money to be investing. Only sort of certain demographics have the money to be investing.
And if you're giving those certain demographics a tax break, then you're like you're creating this like discrepancy or on inequality in our tax system, and that's like a different policy question that comes up. So this is interesting on this point. I think it'd be curious as we go into next year. If you might remember back in twenty eighteen, when we had Donald Trump as the president, there was a series of tax cuts that got put into place, although
he was the president, was in Congress put in place. Those are all set to expire in twenty twenty five, and so there's going to be a big debate in the tax like in Congress next year around tax policy because they're all supposed to expire. Certainly some of them people don't want to expire, other ones people maybe do want to expire. So it'd be very curious in
the tax rule to see what happens and what comes out of Congress. Yeah, and I remember hearing things about wanting to tax unrealized gains as well. I remember hearing it in passing. So I don't know, is there anything new with that or is that off the table. I wouldn't say it's like
off the table. I don't think there's anything new. There is some talking points around and this goes to kind of what I was salkd about, this idea that you have people who have stuff invested and the normal tax rule is like, hey, if I invest in something and it's going up up in value, I don't own any tax on it until I exit that investment, like it can just sit there. And that's this unrealized concept of unrealized gains.
I think, yeah, what happens is from a policy debate. There's certain people, certain people in Congress that I think that's more on your Elizabeth Warren side and that kind of suff I think that's the I say certain people, not because I'm trying to be quiet, just trying to remember who are
all the ones talking about it. I think it's like Elizabeth warrenside. Yeah, they have as a tax policy matter, they viewed it as like, hey, we can increase revenues to the government if we just start taxing these people every year. And that's a I would say, that's a foundational shift
and what tax policy in this country has been. Whether it'll happen or not, I don't know, but that's not how it's always worked here, you know, to then you're getting and their goal is say, well, yeah, but you have these people stuff invested in it's just going up and they don't cash out, So they're avoiding tax. But it's like, but they haven't cashed out either they don't really have the money. It's just paper money kind of or it's on paper they have these gains. So that's a tough
question. But it would as a historical matter of tax policy be like a huge shift in how the United States approaches taxation. Yeah. I hope that doesn't happen, but I guess it goes back to, you know, the larger government problem of overspending. Right, the government can balance its own books, they spend too much and then they have to where do you get the revenue from? Well, got to raise taxes. And this is not just a US problem, but maybe it goes back to the whole Fiat debt based
system and which is a larger conversation. So uh yeah, thoughts on no, I mean just yeah, it's a big what you're getting added things that I don't think there's ultimately or clear answers to. Right. You know, you have different people have different viewpoints my background and economic stuff. You have these bigger, like fundamental questions you discuss around tax policy, like what is it? But there is the idea of from a finance standpoint, it is
very simple. You know, the government has expenses it has to incur and we can you know, people can have a debate all day long about what those should be. But then and then in order to pay those expenses, they have to get generate funding to pay those whether that's through taxation, through borrowing or something. And these are really deep questions. People can have it.
You can debate all day. We could see it all night it having some drinks and talking about them, and there's not I don't know at the end of the day. There's probably some answers that are some in some ways better than not, but they're often trade offs and and so you got to sit around and figure it out. And I don't have any good answers for what the outcome will be. It's I have faith that at some point we will figure it out and it's going to kind of keep going forward and things
will be okay. But yeah, it's it's super super interesting questions. For sure. Maybe crypto and blockchain will offer a solution. As you know, there's future iterations around it, and I look, they're going to tokenize the money anyway, so maybe there's a solution there. Who knows. Yeah, you knows where. Yeah, and I do think as blockchain technology and at a fundamental comes into change how we do things, maybe change how financial transactions
occur, how they're structured, how they're settled. There there could be opportunities there to have some changes in how the system operates. M all right, moms, I got some wrap up questions here for you. First, if you could create your own metaverse, what would the theme be? Oh, I don't know, that's a tricky one. I it might be like outdoor ecosystem. I'm like a big like I live in Colorado, like the outdoor or so kind of be that to be kind of like outdoor oriented. Nice
rapid fire questions. Favorite food. I grew up in southern California, so I'm gonna go with Mexican Mexican food, particularly Baja California style Mexican food. I have yet to try that, but on my list. My favorite musician or band for me, it is a lie. Could be anybody need given time, but the one that always comes back. That's old school. I had two older brothers Pink Floyd. So my oldest brother, remember when I was a kid, he was a huge Pink Floyd fan. So I always
go back to Pink Floyd. It's one of those old school English rock bands for sure. Favorite movie I would say Shawshank Redemption good. One favorite book Ivan Home, Sir Walter Scott's like a classic Robin Hood kind of tail in there, So that's one of my favorites. Nice and when you're not working at tax Bit, what are you doing for fun? Often mountain bike riding, being outside in general, stand up paddle board, that kind of stuff.
Well's pleasure chatting with you. I appreciate all the insights and knowledge, and I definitely have to have you back on because you know, this taxic thing is only going to continue to get crazier as the government tries to figure out all of this. But thank you so much for joining me. Yeah, no, thank you for having me very much. I super appreciate it.