On Dec. 11, 2018, the Commodity Futures Trading Commission released a request for public comments signaling their belief that there will be an increase in the trading of crypto assets and crypto-based derivatives on organized exchanges. This belief is evidenced by the launch of the Coin Futures and Lending Exchange, and the anticipated launch of Bakkt and the Eris Exchange's crypto market.

The increases in trading and the number of organized exchanges give rise to unique U.S. tax issues that may not have applied to a crypto asset before, including:

  • Whether gain or loss will be triggered annually, regardless of whether the crypto asset is sold.
  • Whether a non-U.S. fund can trade a crypto asset without being subject to U.S. taxation.
  • Whether certain rules apply that can defer the recognition of a tax loss despite the sale of an asset.

This is because the tax consequences of trading in an asset can change as it becomes actively traded, and in some instances, whether trading is on an organized exchange.

Thus, holders of crypto assets should review their holdings and consider whether an asset's trading has become sufficiently active to be subject to tax treatment that differs from its prior treatment. Further, the differences in active trading and whether such trading is on an organized exchange can cause differences in tax treatment among tokens.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.