US federal employees now need to disclose cryptocurrency holdings
The ethics office is the latest government branch to be forced to categorise cryptocurrency.
The US Office of Government Ethics (OGE) has issued an advisory for government employees, instructing them to disclose virtual currency holdings in excess of $1,000, or which earned income of over $200 in the reporting period, on their annual transaction and periodic transaction reports.
The guidance was reportedly issued in response to numerous requests from government workers who wanted to know whether they had to disclose cryptocurrency holdings the way they do other investments.
Currency, commodity or security
Investment assets need to be disclosed as a matter of course to allay conflicts of interest, but cryptocurrencies can wear different hats at different times, depending on their design and who's holding them for what purposes. This has caused some confusion, and the OGE stresses that cryptocurrency holdings, and certain cryptocurrency transactions, only needed to be reported as a transaction of an investment asset.
At the same time, it acknowledges that certain cryptocurrencies will not necessarily fall under this category and may be subject to existing exemptions, but that neither it nor any other government agency is really in any position to make this distinction, and that filers should just go ahead and report any significant crypto holdings to be on the safe side.
"The Internal Revenue Service treats virtual currency and property (and not real currency)... The Commodity Futures Trading Commission (CFTC) views certain virtual currency as a commodity... Officials at both the CFTC and Securities and Exchange Commission recently noted that many digital assets, including virtual currencies, are being promoted as investment assets," the report said.
At the same time, it notes that the Ethics in Government Act (EIGA), requires the reporting of "any interest in property held... for investment or the production of income..."
With these in mind, the OGE just went ahead and decided that any significant holdings, or any which have produced significant returns, need to be reported to cover both the letter and spirit of the law in this grey area.
"In brief, filers report their holdings in a virtual currency if the value of the virtual currency holding exceeded $1,000 at the end of the reporting period or if the income produced by the virtual currency holding exceeded $200 during the reporting period. Filers are required to identify the name of the virtual currency and, if held through an exchange or platform, the exchange or platform on which it is held," the OGE said.
The underlying ambiguity behind the classification of cryptocurrencies is starting to settle down, with different agencies gradually laying claim to different facets of the technology. The SEC has been the most vocal recently, laying down dividing lines between securities and non-securities, including some of the situations where a coin can morph between these legal categories.
Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and NANO.