Restrictions and Tactics with Crypto Dealer Accounts

The definition of “security” is found below:

1. 15 U.S.C. §77b(a)(1)
2. 15 U.S.C. §77c(a)(10)

Crypto is NOT a “security” because:

1. It does not satisfy the above definitions of “security”.
2. There are no shared accounts whereby people bought “units of participation” in said accounts.  Investment Co. Institute v. Camp, 274 F.Supp. 624, 1967 U.S. Dist. LEXIS 9343 (D.D.C. 1967)   , rev’d,  Fed.Sec.L.Rep. (CCH) ¶ 2438, 420 F.2d. 83, 136 U.S.App.D.C. 241, Fed.Sec.L.Rep. (CCH) P92438 (D.C. Cir. 1969)
3. There are no “investment contracts” and whereby there was an “expectation of profits to be derived solely from efforts of others”.  The hardware directly owned and used by the owner produced the profits, not others.  SEC v. Shiner,  Fed.Sec.L.Rep. (CCH) P 92430,  Fed.Sec.L.Rep. (CCH) ¶ 2430, 268 F.Supp.2d. 1333, Fed.Sec.L.Rep. (CCH) ¶ 92430, Fed.Sec.L.Rep. (CCH) P92430, 2003 U.S.Dist.LEXIS 15606 (S.D.Fla. 2003).

See:

Proof of Facts: That Crypto Currency is not a “Security” that requires “Registration”**, SEDM
https://sedm.org/proof-of-facts-that-crypto-currency-is-not-a-security-that-requires-registration/

The 1040NR form has a block for self-reporting activities in crypto:

Regulations governing brokerages are found below. Unfortunately, since crypto is not a security, crypto exchanges should not be included:

31 CFR Part 1023 – Subpart D – Records Required To Be Maintained by Brokers or Dealers in Securities
https://www.law.cornell.edu/cfr/text/31/part-1023/subpart-D

Some people think crypto instead is considered a commodity which is regulated under 31 C.F.R. Part 1026. The definition of “commodity” in 7 U.S.C. §1a(9), however, doesn’t list crypto as a commodity so its purposefully excluded. That definition uses the word “means” instead of “includes”, so the definition can’t be enlarged by abusing “includes”.

The section that addresses when a TIN is not required is at 31 C.F.R. §1023.410(a)(3). American nationals do not fall in those exceptions, as they specifically list aliens.

When opening a crypto brokerage account you can cover yourself is by providing either and not providing the TIN on that form:

1. A W-8BEN or W-8BEN-E -for aliens
   About IRS Form W-8BEN, Form #04.202
   https://sedm.org/Forms/04-Tax/2-Withholding/W-8BEN/AboutIRSFormW-8BEN.htm
2. W-8SUB, Form #04.231-for American nationals.
   https://sedm.org/Forms/04-Tax/2-Withholding/W-8SUB.pdf

Then

1. Reference the exceptions to furnishing a TIN under 26 C.F.R. §301.6109-1(b)(2).
2. State in an affidavit that the TIN is provided ONLY for the purposes of the BSA and that it should not be imputed to any information return for tax reporting purposes, as the transactions are not taxable.

They certainly will report it. We-re sure their system shoots that TIN all over the place with zero regard for acceptable limitations. Then all you can do is rebut it.