Quote Originally Posted by Stephen View Post
I am looking into playing in the cryptocurrency markets, especially Bitcoin. As Bitcoin becomes a mainstream currency, and as FRN fiat currency value declines due to deficit spending made possible by printing money (actually I think mostly they mostly just create it in computer now instead of actually printing it), I seek a means of storing value that can easily be stored, and liquidated.

While looking for a cryptocurrency exchange to do business with I found that every exchange willing to do business with anyone in the USA requires Know Your Customer (KYC) information. I found this webpage that explains why:
https://www.coinfirm.com/blog/usa-cr...ation-bitcoin/

So once KYC information is given, and the exchange knows your wallet address, they will do currency transaction reports if the value stored in it reaches, or exceeds, 10,000 as measured in FRN, or if there are transactions that also meet, or exceed it. Profit, and loss, are reported to the IRS, and the IRS will expect taxes to be paid on it.

Is there a way to trade in cryptocurrency that does not incur a tax liability? Does the IRS consider taxes are owned only when Bitcoin profits are exchanged directly for goods, and services, or converted to FRN?
I will express a viewpoint that maybe unpopular.

One should partner with the IRS (and the US tax code) in order to profit. Leverage government to make you money.
In the blockchain space, there are centralized exchanges and decentralized exchanges.

As a US person (for tax purposes), there is no way to trade in cryptocurrency without incurring a tax liability. The US (and Eritrea) are the only countries in the world that tax their citizens' worldwide income.
If a person wanted to exit the tax system, expatriation is a legal way to do this although you may still be subject to an exit tax.
Taxes are owned as soon as "accession to income" occurs. Trading in crypto for profits, would be a capital gain. Short term capital gain tax rates are equivalent to earned income tax rates. The one positive on short term capital gain is that it is considered unearned income by the IRS, thus you avoid FICA taxes.

My opinion, it is wiser to seek to reduce over time to eventually eliminate your tax bill. This will require some help from professionals for record keeping, reporting, as well as compliance with the US tax code.