The head of the U.S. Federal Reserve warned Congress that bitcoin and other cryptocurrencies are dangerous to “unsophisticated investors” and should not be considered real currencies. Fed Chair Powell Criticizes Cryptocurrencies Jerome Powell, who became Fed chair in February, succeeding fellow cryptocurrency critic Janet Yellen, said on Capitol Hill that “relatively unsophisticated investors see the … Continued
Yesterday, bulls charged the crypto market, which caused Bitcoin to add $9B to its market capitalization in less than thirty minutes. But the Fed chairman on crypto is swinging the opposite way.
Today, we’ve seen a few bears emerge from the forest. Specifically, the head of the Federal Reserve spoke on cryptocurrencies today, providing comments that indicate he is bearish on virtual currencies.
Fed Chairman on Crypto: A Risky Investment
On Wednesday, Jerome Powell, the head of the Federal Reserve, which is the US’s central banking system, spoke with members of Congress. During the ...
Since the incredible bull run last year, early adopters, and even people who invested in cryptocurrencies back in January 2017, have made an incredible amount of financial gains. In the U.S. some people who want to cash out a good chunk of money realize they’ll end up paying the taxman (IRS) a lot of money in capital gains. However, there are ways people can avoid heavy crypto-taxation and capital gains. This week, news.Bitcoin.com spoke with Tim Picciott, a financial advisor and Certified Financial Planner (CFP) for ten years, and he explains how he’s been helping the ‘crypto rich’ avoid hefty penalties and capital gains legally.
The Liberty Advisor Says There Are a Bunch of Methods People Don’t Know About That Can Help Them Legally Avoid Heavy Taxes and Capital Gains
We recently chatted with the financial planner, Tim Picciott, otherwise known as the Liberty Advisor. Picciott was recently on the Declare Your Independence show with Ernest Hancock on Freedom’s Phoenix explaining how he’s helping people who’ve accumulated sizable crypto holdings use the same strategies ultra high net worth families use to legally avoid substantial taxation. Picciott also presented a keynote speech at the TDV Investment Summit, explaining how, in the past, he had to leave a lucrative practice, pay a hefty fine, drop his series 7, and was effectively unemployed for three months until the government approved his paperwork.
Now Picciott’s business is up and running and he’s assisting individuals who’ve become crypto rich avoid hefty taxation. Unlike most CFPs, Picciott understands the current economic system is broken, and so he approaches financial management in a different way.
News.Bitcoin.com (BC): So how did you get into cryptocurrencies and learning about bitcoin?
Tim Picciott (TP): I graduated school in 2008, just in time for the world meltdown and started my career the day Lehman Brothers crashed. So I was always told that everything that happened in 2008 couldn’t happen. I was in the graduating class that won the national competition for the Federal Reserve, and I was told all this different stuff. Then I graduate, and, boom, everything collapses. I immediately became distrustful of the financial system. One day someone told me that the Federal Reserve was private, and I didn’t believe them. So my girlfriend bought me the ‘Creature from Jekyll Island’ by G. Edward Griffin, and the book really blew me away. I went further down the rabbit hole and found out about Ron Paul, and I found out about bitcoin when it was around $3. Unfortunately, I didn’t buy any.
My interest in bitcoin basically stemmed from my distrust of the system and being in the libertarian movement. Then over the past couple of years, I became really good friends with Ernest Hancock from the Freedom’s Phoenix broadcast. And he kept telling me that I got to look into these cryptocurrencies.
I’m also a little bit different because I’m a certified financial planner who holds these views, because most people in my industry don’t want to recognize there’s problems within the system.
I see the current system is essentially high tech slavery. I don’t like being a slave, and I don’t like my kids being a slave. I see cryptocurrencies as a way to bypass all these middlemen and bypass a lot of these parasites to really free humanity.
BC: How did you get started helping the crypto-rich avoid taxes and capital gains legally?
TP: Last year around this time, I was at a party at Ernie’s, and there were a lot of rich cryptocurrency holders. Ernie came up to me and said, “Hey we got a bunch of rich early adopters here and they needed some financial advice.” One of the gentlemen talked to me, and he had no heirs and no kids, and didn’t know what to do with his cryptocurrency gains. And he asked me what does the top 1 percent of the population do to add their assets into the system, and how do they avoid substantial capital gains legally. I knew what to do with stocks and bonds, or if a company had a highly appreciative business what they would do, but at the time I didn’t know how to do it for crypto.
Then I attended the Nexus Earth conference in Colorado, and I had a few people ask me about self-directed IRAs. People don’t realize it but you can put pretty much anything into a retirement account as long as it’s not deemed a collectible. Now I’m working with a few guys out of Massachusetts who have been helping clients out with financial management for two decades. They specialize in alternative investments and self-directed IRAs so I teamed up with them to help roll out the business.
BC: What kind of methods are you using to help them?
So basically I have a few ways of helping people. I have methods that help people out who are already crypto-rich who want to work within the system to avoid capital gains. And I’ve got a few ways to help people who already have IRAs and 401Ks so they can become crypto rich, and do so by helping them avoid capital gains.
One of the things I saw last year is I saw people cashing out their 401Ks and IRAs to get into bitcoin. Which in hindsight was a pretty good move for them because they made a bunch of money. So I was thinking there’s got to be a better way where people can do this from a tax standpoint. So if you had someone who cashed out a $100,000 of their IRA on January 1, 2017, once they get hit with the taxes they are also gonna get hit with a 10 percent penalty in order to take early distribution.
A year later you’d have close to $900,000 not including a CFP competitors 10-15 percent fee, assuming you used the funds to purchase the cryptocurrency yourself. What people don’t realize is that individuals can do what’s called a Roth conversion and avoid the 10 percent penalty. Let’s say you did the same tactic, but now a year later you have over a million instead, and the entire gain was tax-free legally. So while the investment is inside of the Roth IRA you not only will have an extra $100K, which is nice, but all of the appreciation will be tax-free.
Another way to do this is you put in $100K into cryptos at the peak and your investment is down to $30K, well you can convert your IRA at that point into a Roth, only pay taxes on the $30K to convert it, and all of the appreciation would then be forever tax-free. There’s not one cookie cutter strategy for everyone as every case is different.
BC: How is your methods different than using a trust like Grayscale’s GBTC or other crypto IRA firms?
TP: What I actually do with self-directed IRA or trusts is you can actually hold the cryptocurrencies yourself. So the assets are in your IRA, say if you held bitcoin cash (BCH), you can hold it just like you do now. Plus some of these other cryptocurrency IRA firms charge 10-15 percent when I charge 1-2 percent.
BC: Being a liberty minded certified financial planner do you think the government will catch up with people who have lots of cryptocurrencies on exchanges like Coinbase but are simply choosing not to pay taxes?
TP: Yes, especially If you are ‘on the grid’ and you bought your cryptocurrencies on Coinbase or any other major exchange, and you have a ton of assets — You are on the government’s radar.
When they caught Al Capone for all of his criminal activity, it was because he the IRS came to him, and was like: ‘How do you have these five speedboats and mansions but you claimed you haven’t made anything?’ So if all of the sudden, they see you driving around in a ‘Lambo,’ the IRS is going to wonder how you got the money. If you can’t substantiate that purchase you might get into some trouble.
It’s one thing to pull out $100 here or $1,000 there, but when you start pulling out lots of money, like six figures, there’s going to be a pecking order, and the government will start nailing people. Now the government is pretty incompetent and this technology is way over their heads, but if you live in the U.S and claim to make $50K a year while driving a Ferrari you will draw attention. So my methods are a way to basically make all parties better off, except for the IRS. With the types of IRAs, trusts, and foundations we are setting up for people they can avoid paying the taxman large sums of money.
I think there will be people who will be targets, especially the ones using the big exchanges like Coinbase, Kraken, and others.
What do you think about the Tim Picciott (Liberty Advisor) helping the crypto rich avoid heavy taxation and capital gains? Let us know about this subject in the comment section below.
At news.Bitcoin.com all comments containing links are automatically held up for moderation in the Disqus system. That means an editor has to take a look at the comment to approve it. This is due to the many, repetitive, spam and scam links people post under our articles. We do not censor any comment content based on politics or personal opinions. So, please be patient. Your comment will be published.
This summer, over 50,000 trades on popular crypto exchange Kraken, concerning the very controversial alternative coin tether (USDT), were analyzed by journalists, an academic, and a former US Federal Reserve regulator. They describe activity monitored as highly unusual in that larger orders of tether failed “to sway prices much.” Red flags were raised due to none of the three analysts having ever “seen a market behave like Kraken.” Is it a case of blatant manipulation or a giant nothing burger?
Give it a minute, and Tether will be involved in yet another controversy. Intrepid reporters, Matthew Leising, et al., have once again dived deeply into the ongoing USDT mystery. This time, it’s the concept of ‘wash’ trading, where substantial positions basically trade with themselves to pressure an asset’s price.
Between May 1st through June 22nd of the present year, 56,000 USDT orders on Kraken were monitored. For researchers, even massive trades seemed to not impact tether’s price. In fact, larger trades were indistinguishable in this regard from smaller. The sum of 13,076.389 USDT was one exact anomaly, repeating often enough for analysts to conclude something like bots were active on the exchange.
Tether occupies a curious space in ecosystem imagination. It evolved from Realcoin, and has been around for about four years in its present incarnation. Its governing company or outfit appears to have ties to Switzerland and Hong Kong. Last year, publication of the Paradise Papers assumed USDT was birthed by huge crypto exchange Bitfinex, a charge answered by insisting the market maker and Tether Holdings Limited were separated, independent.
In more recent months, USDT has been the subject of attempts to link it to price manipulation, including the notion Bitfinex possibly accounted for half the price runup of late 2017 by trading and inflating tether. Even the US Commodities and Futures Trading Commission (CFTC) is rumored to be investigating both Bitfinex and Tether. The token’s scandalous reputation goes to its heart: each USDT is backed by one United States dollar, or so it is claimed. An audit proved equally controversial, leaving no one satisfied. Nevertheless, it remains consistently in the top 20 most valuable coins by market cap.
The Case for Manipulation
Bloomberg recently suggested tether trading red flags. Enlisting former Fed regulator Mark Williams and NYU’s Rosa Abrantes-Metz, Mr. Leising and his collaborators examined USDT activity on Kraken, finding “oddly specific order sizes—many going out to five decimal points, with some repeating frequently.” Trading bots, if that is what this is, are rather par for the course these days, and hardly controversial. It’s USDT’s lack of responsiveness that has this group searching for explanation. Bitcoin core (BTC), again assuming tether inflation as the cause, jerks and pulls seemingly according to tether dumps, which most would term “normal.” Tether lingers, unresponsive. The theory goes that with increased demand, an asset’s price should correspondingly increase. One trade, of 75 tether, for example, managed to move the price three naughts and a one after a decimal point, basically nothing. And USDT price should’ve gone up at various other stages, along with pumping the gas with still more tether to bring it to settle. That didn’t happen either. Again, what should be a natural search for equalization through supply is instead, seemingly, being controlled by bots.
Some immediately believe this to be textbook manipulation, but more substantive information is needed before making such an accusation. Still, researchers maintain these kinds of irregularities “would be akin to defying gravity.” The manipulation question first came from a renowned poker player, Andrew Rennhack. He scrubbed data from Kraken, and published his musings. He was one of the first to openly suggest something was amiss.
Later, researchers noticed those oddly specific numbers, such as the 13,076.389 tether, lead them to “suspect that such numbers could be signals to cheaters’ automated trading programs. One possible explanation: The software would look for orders with a unique size, and trade against that.” Taking both sides of a coin gives off the impression of a kind of momentum, and government regulators have seen fit to make doing so illegal. No evidence that Kraken itself is involved in any manipulation has emerged. Kraken CEO Jesse Powell responded, “Nothing looks out of place to us in our publicly available data feed. We have not verified the legitimacy of the data set [researchers] asked us to review.”
Is tether’s price being manipulated? Let us know in the comments.
Images via the Pixabay.
Verify and track bitcoin cash transactions on our BCH Block Explorer, the best of its kind anywhere in the world. Also, keep up with your holdings, BCH and other coins, on our market charts at Satoshi Pulse, another original and free service from Bitcoin.com.
The Federal Reserve Bank of San Francisco released a report on May 18 discussing the volatility of the bitcoin price and its impact on the ways bitcoin should be classified, whether as a currency, security, or commodity. Joost van der Burgt, author of the publication and fintech policy advisor at the Federal Reserve’s San Francisco branch, … Continued
The Federal Reserve Bank of San Francisco released a report on May 18 discussing the volatility of the bitcoin price and its impact on the ways bitcoin should be classified, whether as a currency, security, or commodity. Joost van der Burgt, author of the publication and fintech policy advisor at the Federal Reserve’s San Francisco branch,
The central banks of Norway and England have published reports exploring different models for central bank-issued cryptocurrencies. By contrast, Federal Reserve governor, Lael Brainard, recently expressed her opposition to central bank cryptocurrencies – claiming that such would result in broad “macroeconomic consequences.”
Decline of Cash Prompts Norwegian Central Bank to Consider Central Bank-Issued Digital Currency
A new report prepared by a working group of Norges Bank has indicated that Norway’s central bank is contemplating the development of a central bank-issued cryptocurrency. The report states that “A decline in cash usage has prompted us to think about whether at some future date a number of new attributes that are important for ensuring an efficient and robust payment system and confidence in the monetary system will be needed,” adding “If the answer is yes, a [central bank-issued digital currency (CBDC)] may be an appropriate measure.”
Norges Bank identifies three specific purposes for a central bank-issued consideration that it believes “merits further consideration: […] ensur[ing] a public and credit risk-free alternative to deposits in private banks, in addition to cash[,] function[ing] as an independent backup solution for the ordinary electronic payments systems,” and “ensur[ing] the existence of suitable legal tender as a supplement to cash.”
The report states that “It is too early to conclude whether Norges Bank should take the initiative in introducing a CBDC. The impacts of a CBDC – and the socio-economic cost-benefit analysis – will depend on the specific design. The design, in turn, will depend on the purpose of introducing a CBDC,“ adding that “A CBDC raises complex issues,” and “There is virtually no international experience to draw on.” Norges Bank states that it “will continue to issue cash as long as there is demand for it. But when cash usage declines, a CBDC can be an alternative to deposit money. The primary purpose of a CBDC is to ensure confidence in money and the monetary system.”
“Further analysis is needed to assess the purposes of a CBDC, the types of solutions that best achieve these purposes and the benefits measured against financial and other costs. This is a long-term undertaking. The aim of publishing the working group’s report is to inform the public about its work, disseminate knowledge[.] and initiate a dialogue with stakeholders,” the report states.
English Central Bank Explores Different Models for Central Bank-Issued Cryptocurrency
The Bank of England has published a working paper exploring three potential models for central bank-issued digital currencies.
The three models explore are the “Financial Institutions Access” model (FI), the “Economy-Wide Access” model (EW), and the “Financial Institutions Plus CBDC-Backed Narrow Bank Access” model (FI+). The FI model would see “CBDC access […] limited to banks and [non-bank financial institutions (FBFIs)],” whereas the EW model additionally allow “households and firms” to access CBDC. The FI+ model would see “CBDC access […] limited to banks and NBFIs,” however, “Within the NBFI sector there is at least one financial institution that acts as a narrow bank, providing a financial asset to households and firms that is fully backed by CBDC but that does not extend credit. That is, they provide households and firms with an asset that has the risk profile of central bank money, rather than a risk profile linked to the financial institution and of its borrowers.”
The report claims to “find that if the introduction of CBDC follows a set of core principles, bank funding is not necessarily reduced, credit and liquidity provision to the private sector need not contract, and the risk of a system-wide run from bank deposits to CBDC is addressed.” Said principles are that “CBDC pays an adjustable interest rate,” that “CBDC and reserves are distinct, and not convertible into each other,” “No guarantee [of] on-demand convertibility of bank deposits into CBDC at commercial banks,” and that “The central bank issues CBDC only against eligible securities.”
U.S. Federal Reserve Governor Opposed to Central Bank-Issued Digital Currencies
The Norwegian and British reports come approximately one week after U.S. Federal Reserve governor Lael Brainard expressed her opposition to the suggestion of central bank-issued cryptocurrencies at the Decoding Digital Currency Conference in San Francisco.
Governor Brainard expressed a number of concerns pertaining to central bank digital currencies, stating that “there are serious technical and operational challenges that would need to be overcome,” including “the risk of creating a global target for cyberattacks or a ready means of money laundering.”
Mrs. Brainard argued that “the issuance of central bank digital currency could have implications for retail banking beyond payments,” asserting that “If a successful central bank digital currency were to become widely used, it could become a substitute for retail banking deposits. This could restrict banks’ ability to make loans for productive economic activities and have broader macroeconomic consequences.“ The governor also claimed that “the parallel coexistence of central bank digital currency with retail banking deposits could raise the risk of runs on the banking system in times of stress.”
Governor Brainard concluded that “there is no compelling demonstrated need for a Fed-issued digital currency,” adding that “most consumers and businesses in the U.S. already make retail payments electronically using debit and credit cards, payment applications, and the automated clearinghouse network.”
What is your opinion on central bank-issued cryptocurrencies? Tell us in the comments section below!
Images courtesy of Shutterstock
Need to calculate your bitcoin holdings? Check ourtools section.
Neel Kashkari, the president of the Minneapolis Federal Reserve, slammed the cryptocurrency industry, saying it has become a “farce” due to unregulated chaos and escalating fraud. Kashkari made the biting remarks at Bay College in Escanaba, Michigan, on May 21, where he expressed dismay at the proliferation of scams in the nascent crypto ecosystem. “It’s … Continued
The Federal Reserve has been giving cryptocurrencies and their potential impact on the economy a great deal of thought lately. Most recently, Fed Governor Lael Brainard provided a rare tilt of the Fed’s hand on digital currencies, taking more time, offering more details than usual and demonstrating the resources that the agency has dedicated to understanding … Continued
St. Louis Federal Reserve President, James Bullard, was recently interviewed at this year’s Consensus conference in New York City. That a top US economic policy maker was in attendance is victory enough; however, he was asked his opinions on cryptocurrency going forward by CNBC Global Markets Reporter Seema Mody. He explained he found the phenomenon “interesting,” and how more cryptos being issued all time necessitates keeping an “eye” on them. Mr. Bullard also compared the use case for cryptocurrencies with that of the dollar, and whether the former posed a threat to the latter.
Federal Reserve President Attends Crypto Conference
Federal Reserve President, James Bullard, gave a presentation at this year’s giant Consensus conference in New York City. Reread that sentence. A sitting Fed policy maker thought it important enough to attend a crypto soiree. That’s news enough. But more importantly, President Bullard gave a presentation on the government’s current thinking about cryptocurrency.
In his talk, he acknowledged crypto is facilitating trade that might otherwise not occur. He couldn’t help himself by mentioning illegal activity (and we all know fiat currencies are never used in illegal activity), but he did describe decentralized money’s lean toward frictionless transactions (especially with regard to costs/fees) as being an advancement.
The Fed policy maker reserved the bulk of his comments, both in the presentation and during a post-game interview with CNBC, to talk about the problems in crypto as he sees them. One issue is simply the number of currencies being offered. The 12th St. Louis Fed President feels this over complicates matters, especially with regard to exchange rates and volatility.
Asked if cryptocurrencies pose a threat to the dollar, Mr. Bullard, 56, answered he didn’t think so. Global Markets Reporter Seema Mody, who is covering Consensus for CNBC this year, quickly followed up with a “but it could be?” The Fed President was noncommittal, choosing instead to shrug and give the pat answer about no one really knowing what the future holds. He emphasized how since its creation the US dollar has vanquished nearly all currency competition due to its being backed by the world’s strongest economy. It’s abundantly clear, Mr. Bullard suggested, people want the dollar and not crypto … at least at the moment.
Fed Coin on the Horizon?
Ms. Mody pressed Mr. Bullard about his presence at the conference, asking if this was a hint of things to come with regard to a future coin birthed by the Fed, a Fed Coin? Interestingly he didn’t dismiss the idea outwardly, and instead said they’d for sure look at the possibility, as the Fed does with many different types of financial innovations. He also assured there wasn’t any plan being hatched at the moment, no imminent Fed Coin coming. Mr. Bullard also wondered aloud what the gains would be by creating such a coin. He smiled subtly, assuring he’s keeping an “open mind.”
His comments seem to be less strident than statements issued by the St. Louis Fed on the very subject not even one month ago. “The St. Louis Federal Reserve has published an essay critically evaluating the notion of cryptocurrencies that are issued by central banks,” we detailed. “The article is highly dismissive in presenting what it describes as ‘the non-case for central bank cryptocurrencies,’ concluding that ‘a central bank will not issue cryptocurrencies in the sense of a truly decentralized and permissionless asset that allows users to remain anonymous.’”
A rather curious fact about the St. Louis Fed, one of twelve jurisdictions in the Federal Reserve system (the 8th district serves Indiana, Kentucky, Missouri, Illinois, Tennessee, Louisiana, Mississippi, Arkansas), is how it has recently become very chatty about crypto. As these pages reported back at the beginning of this year, “Aleksander Berentsen and Fabian Schär of the Federal Reserve Bank of St. Louis have recently published an article that emphasizes many of the benefits of cryptocurrencies. The article states that ‘cryptoassets are well suited to become an important asset class,’ in addition to offering praise regarding a number of the major applications associated with cryptocurrencies.”
Do you think a Fed president attending a crypto conference is meaningful? Let us know your thoughts in the comments below.
Images via Shutterstock, Pixabay, Twitter.
Need to calculate your bitcoin holdings? Check our tools section.
James Bullard, who is at the helm of the St. Louis Federal Reserve Bank, is concerned that cryptocurrencies are complicating the markets. As an official of the centralized government the cryptocurrency market is designed to avoid, Bullard may have stood out at Consensus 2018, which is a blockchain technology summit hosted by CoinDesk. But that didn’t
The Federal Reserve Bank of St Louis, one of 12 regional Reserve Banks that make up the United States’ central bank, has conducted a study asking some of the biggest questions in cryptocurrency today – and they may have found some real answers. Their researchers investigated the control structure of various currencies and looked into whether … Continued