Doesn't GAAP have some obviously stupid rules about crypto? I don't mean to excuse scam accounting but I don't consider GAAP automatically optimal either. (Putting aside that Tether shouldn't be backed by crypto.)
Yeah - GAAP definitely doesn’t work with crypto. Is eth an asset, currency, or inventory? If I’m a big crypto firm and I regularly use eth for chain fees, do I calculate that as a sale of an asset? If my eth has appreciated since it’s purchase, did I just make a sale?
When I’m adding liquidity to a common pair that I utilize a lot and get a divergent loss between the two assets, should that be impairment at the time of the transaction or only when all the coins are converted to USD?
I can go on and on and on about the impossibility to comply with tax regulations and crypto. I’m an avid crypto user, I like making bots for all the games, I think NFTs are cool and always like meeting the programmers turned artists, I participate in 10+ exchanges and 50+ liquidity pools across the map.
When it came time to do my taxes this last year, I had to hire a crypto specific tax person. His advice was that every time I transfer crypto off an exchange, it is ‘sold’ for that price and I have to pay taxes on the minuscule difference between my purchase price and the 10 seconds it take me to transfer into the meta verse. It’s literally impossible to do it otherwise.
I think the rules are "stupid" only in that it would expose too much fraud if the companies followed them. Crypto currencies are no different than any other speculative asset for tax purposes. Treat them like stocks.
What if you burn some ETH on gas fees while interacting with a contract? Is that considered "sold"? Can you write it off as a loss? Does that contribute to wash-sale limits? People like to jump to analogs because it's easier to make sense of, but maybe we just need a new treatment of crypto altogether?
Transaction fees are completely normal. In-kind transaction fees are maybe a little less normal, but they're definitely something that happens. GAAP will have rules for dealing with these things.
