The World of Crypto in January 2023
The month of January marks the beginning of a new crypto year. Read on to get the scoop of events that took place in the first month of the year.
The US Internal Revenue Service’s Guidelines for Harvesting Cryptocurrency Losses
Though, according to President Biden’s executive order, ‘crypto is here to stay,’ the United States Securities has long considered crypto high risk, and the topic of regulations comes up once in a while. 2021 was a good year for the crypto market, with Bitcoin reaching an all-time high and the general market hitting a market cap of 3 trillion in November. However, 2022 was the opposite. It saw:
- Alarming lows all year round. The value of the cryptocurrency market is now less than half of what it was a year ago.
- Terra network’s complete blockchain, its native currency LUNA (now LUNC), and its stablecoin UST (now USTC) all crashed in May. Many individuals lost their money in this too significant incident, leaving users of cryptocurrencies with a sour taste in their mouths.
- Bankruptcies of major crypto companies like BlockFi, Three Arrows Capital (3AC), Celcius Network, and the most notable one—FTX.
Still, it is expected that the distinction between various categories of digital assets will remain and become stronger in the US. Since cryptocurrency transactions are subject to income tax, these distinctions aid the Internal Revenue Service (IRS) in addressing them. In light of the events of 2022, the IRS gave unclear but unfavorable instructions for those who suffered losses in the cryptocurrency meltdown.
Losses incurred throughout a year may be deducted under CCA 202302011, provided they are not covered by insurance or other means. To calculate a 2022 tax loss, the IRS considered two possibilities: worthlessness and abandonment. In accordance with the rules governing other itemized deductions, the loss from a worthless security is recognized as a loss from a sale or exchange and is therefore not excluded.
The limitations on casualty losses do not apply to theft losses resulting from transactions conducted for profit, including staking and mining. In addition, by amending Code Sections 6045 and 6045A, the Infrastructure Investment and Jobs Act mandates that brokers (as that term is generally used) provide tax reporting about digital assets, including cryptocurrencies.
You might wonder, ‘ can the IRS track my cryptocurrency?’ The short answer is, Yes.
Some exchanges send you the IRS 1099 forms detailing your cryptocurrency transactions. You can receive a warning letter regarding outstanding tax liability if you fail to submit transactions that have been reported to the IRS via Form 1099. Subpoenas are another method the IRS uses to monitor crypto activities. For example, the IRS has repeatedly subpoenaed many exchanges, including Coinbase, over the past few years, demanding that they provide transaction details of some accounts.
Justin Sun Wants Five Countries to Recognize Tron (TRX) As Legal Tender This Year
The term ‘legal tender’ has become popular among crypto enthusiasts. In a Twitter thread made on January 28, Justin Sun, the founder of Tron, stated that his KPI is for TRX to be legal tender in at least 5 countries by the end of 2023. Though Bitcoin and other cryptocurrencies are legal in many countries, Bitcoin is the legal tender of 2 countries—El Salvador and the Central African Republic (CAR). This makes Justin’s goal ‘ambitious.’
The tweet was accompanied by flag emojis of Dominica and Sint Maarten, giving the impression the latter might be next on the list. TRX became legal tender in Dominica in October 2022. The country’s commonwealth approved TRX and six Tron-based digital assets, including BTT, JST, NFT, USDD, USDT, and TUSD, legal status as recognized digital currencies. On January 24, Rolando Brison, a St. Maarten’s parliament member, proposed legislation to make Tron legal tender.
A Step Towards Wider Crypto Adoption
According to Justin Sun, ‘This is an ambitious goal, but I am confident that with hard work and dedication, we can make it a reality.’ He believes this could only be the start of a larger adoption of cryptocurrencies. The general public is more likely to invest in and use a digital currency when a government accepts it as a legal tender since it gives them a sense of trust and security.
The Launch of the Shadow Fork Brings Ethereum One Step Closer to the Shanghai Upgrade
Following the merge, the Ethereum network has been gearing up for its next upgrade, known as Shanghai, which is expected to take place in March 2023. The Shanghai update is significant because it will enable stakers to withdraw 16 million ETH ($26 billion) that has been locked into the network since the Beacon Chain in 2020.
According to a January 23 Twitter thread by Go-Ethereum developer Marius Van Der Wijden, developers have set up a testing environment named ‘Withdrawal-Mainnet-Shadow-Fork-1’ as the update’s date gets closer. The new shadow fork was created to put the Ether staking withdrawal feature to the test ahead of Shanghai. The config wasn’t properly implemented on GETH at the beginning, which caused a few issues. However, once the configuration was correctly applied, every node reached a consensus.
The shadow fork is a duplicate of the blockchain used to run testing before the public testnet is created. Data will be copied from the network to a testing environment via a series of test forks as part of this shadow fork. It is anticipated that the Shanghai public testnet will go live soon.
A Look at NFTs: Amazon to Launch NFT Initiative Soon and Ordinal Protocol Sparks Debate
In the spring of 2023, the world’s largest online retailer, Amazon, will introduce a non-fungible token (NFT) project. This follows Amazon Web Services’ (AWS) recent collaboration with Ava Labs, the startup behind the Avalanche blockchain. According to sources, Amazon is developing a digital assets business. The estimated release date for these current projects appears to be April.
The e-commerce firm is not well-known for venturing into the crypto or blockchain worlds. So the announcement is unexpected because Amazon doesn’t directly accept Bitcoin or any other cryptocurrency. Still, customers can use them to purchase Amazon gift cards.
A particular emphasis is placed on blockchain-based gaming and associated NFT applications. Although AWS occasionally posts openings for developers and engineers in the Web3 space, it is unclear exactly who is in charge of the company’s NFT initiative.
Still on NFTs…
An NFT protocol known as ‘Ordinal’ recently launched on Bitcoin’s mainnet. Software engineer Casey Rodarmor developed Ordinal. January 21, he published a blog post announcing the project’s official launch on the Bitcoin mainnet. However, whether the protocol will benefit the Bitcoin ecosystem has divided the crypto community.
The protocol allows for the Bitcoin equivalent of NFTs, regarded as ‘digital artifacts’ on the Bitcoin network. These ‘100% meme-inspired’ digital artifacts can include JPEG photos, PDFs, video, or audio formats.
While some claim it would expand Bitcoin’s potential financial uses, others think it deviates from Satoshi Nakamoto’s original intent. Dan Held, a bitcoin bull, was among many who welcomed the development, arguing that it will increase demand for block space while bringing more use cases to Bitcoin.
Some others, like Adam Back, a core Bitcoin developer, weren’t satisfied with the development, calling it a ‘waste’ and proposing that the network could do something more effective. The Bitcoin network also announced in a tweet that Ordinals have taken up the majority of the BLOCKSPACE.
The native currency of the Bitcoin network, satoshis, is inscribed with arbitrary content to produce NFT-like structures. No sidechain or additional token is required; the inscriptions happen on the mainnet of Bitcoin. According to the Ordinals website, only 277 digital artifacts have been inscribed thus far.