Will Bitcoin Ever Be Regulated?

This article is originally published in Albaron Ventures.

As Bitcoin and other digital assets continue to grow in adoption and popularity, a common topic for discussion is whether the U.S. government, or any government for that matter, can exert control of its use. 

There are two core issues that lay the foundation of the Bitcoin regulation debate:

The digital assets pose a macro-economic risk. Bitcoin and other cryptocurrencies can act as surrogates for an international currency, which throws global economics a curveball. For example, countries such as Russia, China, Venezuela, and Iran have all explored using digital currency to circumvent United States sanctions, which puts the US government at risk of losing its global authority. 

Image: https://pixabay.com/illustrations/bitcoin-btc-cryptocurrency-1813503/

International politics and economics are a very delicate issue, and often sanctions are used in place of military boots on the ground, arguably making the world a safer place. 

The micro risks enabled by cryptocurrency weigh heavily in aggregate. One of the most attractive features of Bitcoin and other digital assets is that one can send anywhere between a few pennies-worth to billions of dollars of Bitcoin anywhere in the world at any time for a negligible fee (currently around $0.04 to $0.20 depending on the urgency.) 

However, in the hands of malicious parties, this could be very dangerous. The illicit activities inherently supported by a global decentralized currency run the gamut: terrorist funding, selling and buying illegal drugs, ordering assassinations, dodging taxes, laundering money, and so on. 

Can Bitcoin Even Be Regulated?

Before diving deeper, it’s worth asking whether Bitcoin can be regulated in the first place. 

The cryptocurrency was built with the primary purpose of being decentralized and distributed– two very important qualities that could make or break Bitcoin’s regulation. 

By being decentralized, Bitcoin doesn’t have a single controlling entity. The control of Bitcoin is shared among several independent entities all over the world, making it nearly impossible for a single entity to wrangle full control over the network and manipulate it as they please. 

Image: https://pixabay.com/illustrations/bitcoin-business-money-4503758/

By being distributed, Bitcoin exists at many different locations at the same time. This makes it very difficult for a single regulatory power to enforce its will across borders. This means that a government or other third party can’t technically raid an office and shut anything down. 

That being said, there are several chokepoints that could severely hinder Bitcoin’s adoption and use.

  1. Targeting centralized entities: exchanges and wallets 

A logical first move is to regulate the fiat onramps (exchanges) , which the United States government has finally been getting around to. In cryptocurrency’s nascent years, cryptocurrency exchanges didn’t require much input or approval from regulatory authorities to run. However, the government started stepping in when cryptocurrency starting hitting the mainstream. 

The SEC, FinCEN (Financial Crimes Enforcement Network), and CFTChave all played a role in pushing Know Your Customer (KYC) protocols and Anti-Money Laundering (AML) policies across all exchanges operating within U.S borders.  

Cryptocurrency exchanges have no options but to adhere to whatever the U.S. government wants. The vast majority of cryptocurrency users rely on some cryptocurrency exchange to utilize their cryptocurrency, so they will automatically bend to exchange-imposed regulation. 

Regulators might not be able to shut down the underlying technology that powers Bitcoin, but they can completely wreck the user experience for the great majority of cryptocurrency users, which serves as enough of an impediment to diminish the use of cryptocurrency for most. 

  1. Targeting users.

The government can also target individual cryptocurrency users. Contrary to popular opinion, Bitcoin (and even some privacy coins) aren’t anonymous. An argument can be made that Bitcoin is even easier to track than fiat because of its public, transparent ledger. 

Combined with every cryptocurrency exchange’s willingness to work with U.S. authorities, a federal task force could easily track money sent and received from certain addresses and pinpoint the actual individual with it. Companies such as Elliptic and Chainalysis have already created solid partnerships with law enforcement in many countries to track down illicit cryptocurrency uses and reveals the identities behind the transactions. 

Beyond that, we dive into the dark web and more professional illicit cryptocurrency usage. Although trickier, the government likely has enough cyber firepower to snipe out the majority of cryptocurrency-related cybercrime. In fact, coin mixers (cryptoMixer.io), coin swap services (ShapeShift) and P2P bitcoin transactions (localbitcoins.com) have been investigated for several years now and most of them have had to add KYC and adhere to strict AML laws. 

Final Thoughts

Ultimately, it’s going to take a lot to enforce any sort of significant global regulation on Bitcoin, with the most important factor being a centralization and consensus of opinion. The majority of the U.S. regulatory alphabet agencies fall into the same camp of “protect the good guys, stop the bad guys”, but there isn’t really a single individual piece of guidance to follow. Currently, cryptocurrencies are regulated in the US by several institutions: CFTC, SEC, IRS, making it difficult to create overarching regulatory guidelines.  

In short, yes– Bitcoin can be regulated. In fact, its regulation has already started with the fiat onramps and adherence to strict KYC & AML laws. While in countries such as Ecuador, Bolivia, Egypt and Morocco Bitcoin ownership is illegal, in the US, it would take some bending of the moral fabric of the Constitution in order for cryptocurrency ownership rights to be infringed.

However, it cannot be shut down. There are still ways to buy, sell, and trade Bitcoin P2P, without a centralized exchange. It would take an enormous effort by any government to completely uproot something as decentralized as Bitcoin, but that future seems more dystopian than tangible. 

Swissborg – Control your Wealth

A big bold message hits you when you first access Swissborg’s main website – Control Your Wealth. A strong proposition. One that raises both financial and emotional connotations backed by a logo with a mechanistic and forward looking design. From the mountains of Switzerland, Swissborg is set on a mission to build a platform that puts the control of your wealth in your own hands. Switzerland has been the wealth preservation state for decades where experienced investment professionals and bankers have weathered through recessions and wars preserving generational wealth. The company seeks to continue exactly that succession line of preserving the wealth of the young generations. Powered by the blockchain with a platform secured cryptographically the company seeks to aid the transition of value from the traditional to the digital. In this new day and age, preserving wealth means seeking new alternative ways of transacting and storing value.

Saving money and putting it in the bank or in a pension fund is the mainstream way of preserving wealth for the long term. Although the actual control is lost at the point of transaction as our knowledge of what happens and where does the money gets invested is lost in the chain. Placing your wealth with an investment banker or a trader that only sees the numbers on the screen, desensitized of the months of hard work, savings and salaries paid to represent those numbers. Do you know what happens to your savings? Where does your money get invested in your pension fund? Well done. If you are aware and happy with it, great. The majority of people have no idea or visibility. Entrusting their emergency capital and savings to institutions that may not be communicating their strategy clearly or using channels that don’t align with the younger crowd. It’s no longer enough passing your wealth trustingly to the bank and pension funds who are completely out of touch with the current levels of digitization and new technology. These centralized institutions have eroded their most valuable weapon – trust and transparency. Enough is enough, it’s time to take control of your wealth.

Swissborg is the first Swiss crypto-wealth management ecosystem based on the blockchain, developed by a team of fintech experts.  A simple set of features puts in a position that offers access to tools that can help you manage your wealth:

  • Wealth App – all-in-one wealth app will offer diversified and automatically re-balanced portfolios . You would be able to view your portfolio live at any time with the flick of your wrist using your supercomputer hidden in your back pocket. In order to fund your account, you will be able to instantly transfer fiat and crypto in it where the best conversion rates will be applied aided by an institutional grade market price aggregator engine.
  • SwissBorg SB5 Index – To benefit from diversification eliminating unsystemic risks and achieving market returns the company has developed on of the first crypto index products. Assets are rebalanced periodically to mitigate the risk and you would be able to get an exposure to the top market cap projects that constitute the index. Don’t try picking out the best performers of this new trend rather put your wealth looking long term in the top projects.

Don’t look for the needle in the haystack. Just buy the haystack! – Jack Boggle

Source: Swissborg




Swissborg is a holistic crypto wealth management ecosystem that is accessible to everyone. Simple investment tools are put in the hands of the user build by a team of experts in their respective fields. The company doesn’t stop at disrupting with their main proposition and products that it offers, but also the way it is run and operates. The DAO or “decentralized autonomous organisations” are organisations that are both decentralized and autonomous. Swissborg seeks to run a lean business operation without a centralized zone of operation empowering its employees towards autonomous contribution to the organisation that benefits them on the basis of their input. The company values are a great guidepost for this matter:

  • Meritocracy – through self-organisation and decentralized control the organisation seeks to benefit those who participate on the basis of their contribution and skills rather than their standing in the hierarchy. Rewards on the basis of contribution brings equality and trust within an organisation where individuals have to demonstrate their credibility. This is in development with the company in light of the CHSB token, Swarm platform and the DAO. Swissborg is still developing a fully fledged DAO though it already exhibits large portions of it in the way it operates and makes decisions to the way that it takes feedback and suggestions by the community through the Swarm Intelligence platform & Proof of Merit systems.
  • Transparency & Trust – both key elements for any systems that transacts value between individuals that being through physical cash, IOUs or cryptocurrency. Recently exactly those values have eroded massively in the traditional banking and Financial system.
  • Community & Inclusiveness – a community-centric investment network that offers the same product and services no matter the jurisdiction, nationality, skin-colour, etc. Accessibility without borders that can help one take ownership of their future wealth.

Swissborg’s product and intentions are clearly well-positioned to bring about some serious change in the way how we manage our future wealth. Moreover, with the end of the business cycle many assets that have performed well are due for a correction while negative interest rates affect debt and bond markets in a very bad way. A few safe havens are left to those that seek to preserve their wealth in the face of cash and gold. Although the emergence of Digital assets offers the option for additional diversification and allocation of capital in an asset class with zero to negative correlation to the traditional markets.

Managing your finances and investments from a platform built on a blockchain can add additional security and reassurance against fraudulent behaviour as to the inherent auditability and uniformity of the transactions in the network. Simplicity in the ease of transacting your fiat and crypto into financial products define a path to easier adoption. Crypto indexes are another ingredient for adoption of digital assets and preservation of your capital that stands at the front of Swissborg’s proposition. Indexes are also a great vehicles for your wealth allowing you to get reduced risk market exposure and benefit from improved returns in the long-term. Depending on your personal risk and return appetite different indexes mapping out different areas of the crypto space offer a product to wealth management customers in a different period of their investment journey. Furthermore, not only the product is disruptive to the wealth market. The people behind it elapse decades of experience in the Banking and Investment Management industry in Switzerland, Japan and Canada. Finally, the company is on a definite path to disrupting the way we manage our wealth and invest in the next big wave of economical value creation that is the digital assets space.

Disclaimer: Opinions are my own and not the views of my employer. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

Crypto Analysis: Zilliqa (ZIL)

SUMMARY

  • Project name: Zilliqa
  • Ticker symbol: ZIL
  • Token type: Protocol native Zil utility token
  • Consensus mechanism: Hybrid PoW & PBFT
    • Hash algorithm: Ethash algorithm
  • Genesis date: January 12, 2018
  • Key exchanges: Binance, Ubit, Coinbase & Coinbase Custody, Bittrex
  • Wallets: Moonlet (audit complete), Trust Wallet, ZHIP, Light-waller, Midas Protocol, xZil, Ledger Companion.
  • Current Market Cap: $135,787,048 (04.03.2019 @CoinGecko)
  • Current circulating supply: 8,299,187,391
  • Total supply: 12,000,000,000 ZIL
zilliqa chart

Overview

Launched in January 2018, Zilliqa is a clean-slate public blockchain protocol designed to scale efficiently, without compromise to the security and resilience of the network. This is achieved via the implementation of sharding – network, transaction and computational. Zilliqa is the first public blockchain protocol to implement it. The network employs Proof of Work to establish node identifiers and shard formation while within the shards, Practical Byzantine Fault Tolerance (PBFT) is employed to achieve consensus. Smart contracts are implemented in Scilla, a language created by the Zilliqa team who is mainly located in Singapore.

Product

“To develop a clean-slate protocol that is capable of scaling, without compromising security and resilience.” 

 The company is working on building a blockchain platform where DApps can be built on a platform designed to scale in an open, permission-less distributed network. Implementation of sharding to increase scalability and security characterize this project set as the main differentiator against competitive baseline protocols. The idea of Sharding in the Blockchain field was first put forward in an academic paper co-authored by the Zilliqa team members in 2015. The ability to process transactions in parallel due to the sharded architecture ensures that the throughput in Zilliqa linearly increases with the size of the network. Moreover, it follows a dataflow programming style, where the program can be seen as a DAG. Nodes in the graph represent computations, while arcs represent input/output. Data flow programs are known to be inherently parallelizable and easy to reason about. The key advantage of employing a dataflow approach is that more than one instruction can be executed at once. Several nodes can be activated at the same time running in parallel.

Zilliqa seeks to become the main competitor of Ethereum. A number of initiatives such as developer relations, grants and events aimed at bringing DApps on the platform have been created by the project. Zilliqa aims to provide a platform to run highly scalable computations in a multitude of fields such as data mining, machine learning and financial modelling to name a few. The main industry that the protocol is seeking to disrupt and build a platform for DApps is digital supply chains and advertising. Other possible use cases are automated high-volume auctions & decentralized exchanges. Zilliqa provides the infrastructural support for conducting any trading application at high volume and large scale. Another use case is in DApps for the scientific and academic community where high-performance computing and reliable, accurate results are required. It is evident that efficiency is key to the success of such an application.

The Token Generation Event (TGE) was finished by January 2018, having raised roughly US$22,000,000 for the initial development of the product.  This funding will be able to support the research, development and operations of the project for at least 3 years. The funds raised were given in exchange of its utility token ZIL which is meant to be used as the main currency to exchange for DApps built on top of the blockchain. Along with its use as a utility token, it also supports smart contracts. Scilla is the smart contract language used in Zilliqa.

Zilliqa’s version of mining only requires GPUs to run at full load for a small fraction of time, as Proof of Work is only used to establish identities. Zilliqa uses PoW also to prevent Sybil attacks (a type of network attack based on the attacker forging their identity). Every new node who wishes to join the Zilliqa network has to first perform a PoW.

Key Features:

  • Fault tolerant – no single node controlling the data transaction and data records in the P2P decentralized network, there is no single point of failure in the network
  • No Internet Censorship – It controls and prevents internet Censorship violation as there is no central controlling authority owning the DApps in the network
  • Enhanced Trust – no single entity owns or controls applications on the platform making data theft and manipulation very difficult
  • Sharding – through the use of sharding Zilliqa seeks to solve some of the biggest scalability issues with the blockchain technology. Sharding works by dividing the mining network into small shards, each capable of processing transactions in parallel.
  • Consensus – hybrid POW/PBFT. PoW is used only to prevent Sybil attacks and generate node identities. It uses Ethash algorithm which can be mined with a GPU.

Management

Zilliqa’s leadership team consists of computer scientists with PhDs from top world universities and research institutions such as Princeton, Berkley, and the National University of Singapore (NUS). The solid educational background of the lead team members is also backed up by the experience and track record of its management. Xinshu Dong, CEO of Zilliqa, has previous experience in Blockchain research and development with Anquan. Anquan is primarily deployed for financial and e-commerce applications and is in many ways a precursor to the Zilliqa project. Christel Quek , is an all-star member of the Zilliqa team. She is a Co-Founder of BOLT, a live TV and gaming service with over 3m users in Kenya, Southeast Asia and Latin America.

A number of high profile advisors are involved in the project. Loi Luu, the founder of Khyber who is a frequent speaker at Bitcoin and Ethereum workshops, DevCon2, EdCon and an influencer in the crypto space. Stuart Prior, who is a FinTech veteran with 20+ years of experience in investment banking. He currently works on corporate banking initiatives for the adoption of Blockchain technology.

Zilliqa hasn’t only got an outstanding management team and advisory. It has also secured a number of commercial partnerships with potential use cases and commercialization of its protocol. Mediamath, a leading digital media buying platform and services company based in New York, serving over 250b ad impressions a day. Mindshare, a global media and marketing services company with 7,000 employees across 116 countries and global annual revenue at USD34.5B. Integral Ad Science (IAS), a global software company, headquartered in New York, that builds verification, optimization, and analytics solutions, acting as leaders in viewability, brand safety and ad fraud. Integral Ad Science is part of the mindshare project and a major partnership in the advertising industry for Zilliqa. Other notable partnerships include Genaro Network, Bluzelle, LayerX, Rubicon Project.

Development

Developers with many years of secure software systems-building expertise, software architecture and software engineering work on building Zilliqa’s product. Jia Yaoqi leads the technical team acting as a CTO for the company. The development team is more than 15 strong and they are clearly listed and visible on LinkedIn. Moreover, the GitHub commits and activity can be tracked and clearly demonstrate that constant work on building the protocol is being delivered.

Github.PNG

To bring developers and DApps builders on its platform, the company has an Ecosystem grant program initiative – BuildOnZil:

  • A pool of $5 million USD that will be given to great projects, teams & individuals to start building tools & applications for the Zilliqa platform.
  • Objective: To support & encourage great individuals/teams around the world to start developing tools, libraries & Dapps for the Zilliqa platform.
  • Disbursement method: Min 30% native Zil tokens – the remainder can be in USD or ETH.
  • Disbursement schedule: The selected teams will work with Zilliqa on a set of technical milestones & corresponding deliverables. The award will be dispatched in three batches: initial payment, mid-term payment (once a No. of milestones have been reached) & the final payment (on completion). For each project the code has to be open source and the team is required to maintain the code base for at least 1-year.
  • What is provided:
    • Non-dilutive funding
    • Technical advice (subject to the Zilliqa team’s resources)
    • A feature on the Zilliqa website/other channels as the first batch of developer tools/Dapps
  • Funded development stratified by project type & duration, with grant values awarded based on the prior:
    • Tools & libraries – E.g. plug-in support for existing editors such as Sublime
    • Cross-OS support e.g. Windows, Block explorer, a browser extension to integrate with Zilliqa wallets, Web wallet/desktop/mobile wallet, Debugger for Scilla, etc.
    • Dapps – DEX, games, stable coins, auctions, market places, other Dapps

The final part of the development we are going to quickly look at is the roadmap and expected delivery of features of the product. The project has been active for more than two years and it has already launched their main-net and accomplished the main token swap. The team always delivers on time and clearly communicates on its development and issues that may have arisen.

Roadmap

Community

A strong, professional presence is essential for the long term success of a company, as well as the health of its token. Having multiple, trustworthy communication channels gives a method to reach customers and investors to increase adoption and token value. Zilliqa’s builds its credibility and reputation with PR, events, and regular communications. This creates a pipeline of developers, partners and investors for the company and its healthy future development. Prompting the admins in the telegram channel with a couple of quick-fire questions @Joona came back immediately with answers to the questions:

  1. What features did the project build recently that a consumer or enterprise is using or benefiting from?

We recently released our mainnet on the 31st of Jan, do see.

You can start building on top of mainnet after the bootstrap phase has finished. https://blog.zilliqa.com/zilliqa-mainnet-the-launch-and-beyond-4cd7e113369f

  1. How much did they improve the infrastructure and stack by in terms of scalability, privacy, confidentiality?

We have reached 2488 TPS in testnet previously which is multiple of hundreds time higher than on Ethereum for example.

Privacy is part of our future researches.

  1. What are some of the weaknesses and threads of the project?

 To start with, competing in an open source framework like in the blockchain space does not make much sense. Since, the project is open source, anybody is free to reuse the idea in another project. The biggest problem in blockchains today is scalability. There are several solutions to this problem. The beauty is that each project provides its own solution and this creates a healthy environment of learning from one project and building another one. Each project usually has its own strengths and weaknesses. Attempting to compete with any blockchain whatsoever will take the project nowhere. This will prevent us from adopting smart ideas out there in our so-called competitors. Our philosophy is that one needs to identify the strength of the idea, follow it and be open to learning from other projects.

Community:


Strengths

  • Sharding implemented now not sometime in the future
  • Transaction Speeds increase linearly
  • Environmentally friendly and very secure due to its mixed consensus mechanism
  • Lower transaction fees and higher transactions speed compared to its main competitors like Ethereum or NEO

Weaknesses

  • The niche language used for smart contracts means a smaller pool of talent and a learning curve for new developers
  • Approach to governance is a weakness of the protocol

Opportunities

  • The smart contract language Scilla that Zilliqa uses follows dataflow programming making it ideal for large-scale computations that can be parallelized
  • As the project is open source, it will be capable of being tested by independent parties
  • The ZIL research team is exploring securing PoS consensus, storage pruning, cross-chain support and privacy-preserving computation.

Threats

  • The possible partnership with Ethereum andTron

Conclusion

The current landscape of blockchain protocol platforms is facing major issues regarding their scalability. Zilliqa has a solution to the exact same problem. The exponential increase of the amounts of DApps built on top of different protocols grows every day. The demand for higher transaction throughput is becoming an important factor for those considering building on top of protocols that don’t offer speed. The protocol has been redesigned from scratch over a period of two years by a team with proven academic credentials and relevant industry experience. Moreover, a team of industry movers setting up the bar for novelty within the Blockchain space is putting a serious competition out there to the other main baseline protocols.

External Resources:

 Zilliqa website:  https://zilliqa.com/

Zilliqa Whitepaper: https://docs.zilliqa.com/positionpaper.pdf

Zilliqa Technical Paper: https://docs.zilliqa.com/whitepaper.pdf

Zilliqa Blog: https://blog.zilliqa.com/

GitHub: https://github.com/Zilliqa

Block explorer: https://explorer.zilliqa.com/

Wallet: https://wallet.zilliqa.com/

Charts: CoinMarketCap – https://coinmarketcap.com

CoinGecko: https://www.coingecko.com/en/coins/zilliqa

Metrics: https://messari.io

Disclaimer: Opinions are my own and not the views of my employer. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

Short Essay: Trader

By failing to prepare, you are preparing to fail.”
― Benjamin Franklin

He wakes up early, around five thirty in the morning. Immediately he puts his training clothes on and goes to the gym. The morning workout is as important as the previous night’s sleep. The mind has to be rested and energized, alert so that opportunities can be spotted. Quick breakfast and the morning coffee at the desk as the work day has begun. He’s prepared the day before, he knows what he’s looking for and where a quick win may be on the screens. Time to make some money, lose the ego and learn. He is a trader.


Romanticized by many people, depicted as the ultimate job by trading gurus and educators, becoming a trader and being a trader is a path that many attempt but only a few get through. Trading is a vocation that requires no degree, recognizes no gender, nor color. There are no barriers to entry and everybody can become one if he has the grit to develop the skills and knowledge for the job. Trading is a business, the trader is the business owner taking full responsibility for the ups and downs of the business. Solid foundations in business practice are required. Hard work focused in the appropriate direction where systems are put in place and setups can be recognized. Patiently waiting for opportunities yet constantly studying and researching to find them. Managing the high points of big wins and the low points of maximum drawdowns is inevitable challenging the trader mentally. Like life, up then down… then back up, maybe.

Trading is a one-man business operation. A person with a laptop, internet connection and a chunk of capital. Anywhere in the world. Capital that represents his monthly expenses, a house, a holiday, an inheritance or somebody’s life savings. Full responsibility and weight upon his shoulders, only the matter between his ears to control it. Unlikely other businesses, he doesn’t get paid for the hours put in trading.  The trader gets paid for the output based on performance no matter the hours put in.  He gets paid for the hours it takes to find the right opportunity, at the right time, deploying capital, managing the risks and winning. Or losing. It’s between his ears however it comes.

Trading is not like gambling. Gambling is playing a game of chance, taking risky actions without proper rationale. No risk management, no strategy, no plan, no documentation of individual behavior, performance and emotions. Maybe emotion, just emotion. Black or White. Win or Lose.

Trading is more like fishing. One has to prepare the ship and gear, study fishing grounds, brave the deep seas and the unpredictable weather. Then one can catch fish, or not. Sometimes fishing is great other times one can’t catch anything even if the weather is good. The seas and the markets are unpredictable yet generous and abundant. Factors out of ones control to influence the seas and the markets. The boat might have a mechanical failure, a storm may hit, or one can catch loads of fish, but the prices will slump due to lack of demand. The markets may experience economic turmoil, liquidity and volatility may dry out, or the internet may cut off. Being a trader means being able to keep composure at the highs and hold on through the lows. Learning to be ok with outcomes exactly as they come.

Fishermen and Traders don’t have fixed working hours or monthly schedules. Although, they are always preparing and following a plan of action. Preparing and planning in life, in fishing, and in trading are key factors to success. Putting together proper trading and business plan prevents overtrading, defines clear strategies, setups, frameworks, decision-making, risk management, psychological management and avoidance of common pitfalls. Developing a daily routine according to a trading plan and having the discipline to follow it day in and day out would distinguish winners from the losers. If the market allows. Mastering a trading plan means mastering yourself. One can never fully master the markets, but one can master himself, in and outside the markets. Following a plan can strengthen discipline and help develop patience. Through perseverance and persistence, the trader can build up experience, knowledge and have a very high probability of catching some fish.

Despite an abundance of knowledge, trade setups and capital to trade, if the psychological management and emotional intelligence are not up to par, the trader may be set for failure. The ability to control emotions when winning as well as losing. Self-awareness in regard to strengths, weaknesses, and personality. Everybody is unique and acts differently in equal situations. There are many ways to make money from the markets as there are many different personalities that can employ different strategies with different instruments. To get an edge as a trader, he needs to discover who he really is and what type of markets and strategies will work individually.

Know thyself and knowledge of the stock market will soon follow. Ego and emotions determine far more of investor’s stock market decisions than most would be willing to admit. Traders who manage to act opposite to the mood of the crowd and against their own emotions are best positioned to earn money in the financial markets. Financial risk and emotional risk correlate inversely.

Independent and critical thinking that can withstand peer pressure and external noise would define decision making. The results one gets will depend on one’s actions and the amount of work put in the markets. A trader that tries to play the markets, will get caught sooner rather than later. The player got played. He pays with risk capital for the lack of work and preparation. Patience, discipline, and work are pillars in trading. Being patient timing setups, entries, and exits make or break the bank. Learning when to act is as important as learning when to do nothing and simply sitting on one’s hands. Trading teaches patience and self-awareness. It’s about learning a craft and getting better at it.

The one who succeeds does so after numerous years of trial and error. Putting money at risk and winning can lead to benefits. From having the limitless freedom to spend one’s days and earn ones income as he pleases. The trader exerts his personality in the strategy that is successful and brings in rewards. Through self-expression and creative thinking, a trader can earn their income under their own rules. The fascination for the markets and independent daily practice and learning leads that way. He has made it. Or not. It doesn’t matter. He has developed emotional intelligence. Through introspection and self-study, the trader has discovered his strengths and weaknesses building a profitable strategy and plan around it. The trader has taken responsibility for his losses without blaming others or judging on the basis of outside factors. He is not motivated only by money but also by becoming a better person developing self-confidence, self-reliance, decisiveness and growing a thick skin. Money itself is a fringe benefit. One of the greatest motivators for traders comes from the ability to leverage money for time. The trader can leverage a certain amount of capital that can bring much more benefits than swapping time for money. Wealth is a key to freedom. More wealth buys more time. Time is precious as one never knows how much he’s have got left while everybody gets the same amount each day.

In this new technological world, everybody has to take ownership of their finances and assets as the tools for this are already out there. Blaming one’s country, investment fund or financial advisor for financial losses rather than taking extreme ownership and responsibility for the personal capital is what’s prevalent. Taking control over one’s money is taking control of one’s living. Most times people delegate their savings, pension plans, and investment to other people that don’t necessarily have their best interest at heart. Becoming a trader can help one to take control of finances and investments. Moreover, one can learn to let go of the ego and constantly be curious, open to change and never stop learning. Markets change by the second, as life does.

There is no magic formula. The trader stays committed. Trading isn’t something that can be picked up overnight or even over a year. It’s not a sprint, it’s a marathon. It’s not the fastest, but the one who has the grit to persistently endure that reaches the finish line. Trading is an activity without a beginning and an end. There is always more to learn and absorb no matter the expertise, credentials, capital, and knowledge. The markets are one of the biggest puzzles there is.

Be humble and always be learning.

What is the current situation with Crypto Tax in the UK?

Key Points:

  • Bitcoin and cryptocurrencies are not to be considered as currency or money
  • Full records of your transactions in cryptocurrencies have to be kept
  • Profit gains on cryptocurrencies are subject to Capital Gains Tax (CGT)
  • Businesses and individuals should take additional pre-caution on security and management of their crypto reserves and use of custodial solutions

Cryptocurrencies are a new type of asset that has become prevalent in recent years. Many people find confusing the way cryptocurrencies are transacted, stored and traded electronically. More so that some people are unclear about what cryptocurrencies really are and the particular tax treatment that should be applied in transacting them. The general view of the UK government on these assets is that they are subject to particular types of tax treatment depending on a number of situations. These situations are a set of different taxable events that occur depending on the type of transaction. Examples of such events are selling cryptocurrency,  trading cryptocurrency,  mining cryptocurrency, paying for goods and services, and receiving airdrops, forks or other compensation. HMRC defines cryptocurrencies as ‘cryptographically secured digital representations of value‘ with the assistance of the Cryptoassets Task Force their taxonomy has been established. The Task Force has issued a report that lays out the policy and regulatory treatment of the crypto assets dividing them into exchange tokens, utility tokens and security tokens.

  • Exchange tokens are to be used as methods of payments such as Bitcoin and other cryptos meant for transacting value.
  • Utility Tokens provide the holder with access to particular goods or services that are based upon the particular DLT architecture platform.
  • Security tokens would provide an equity share, debt or economic interest in a DLT based business.

HMRC does not consider cryptoassets to be currency or money.

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Use Case I: Buying/Selling Crypto

The first point of transacting with cryptocurrencies for users would be buying and selling them. Every individual would have a different exit strategy upon buying cryptos. For many, it is prevalent holding them a certain time period then reselling them for profit/loss. Buying and selling crypto assets by an individual will normally amount to investment activity. Every time you sell your crypto this triggers a taxable event which can result from either a crypto-crypto or crypto-fiat transaction. For the purpose of the calculation of your tax basis, both “ends of the stick” fiat-crypto-fiat are required. This taxable event is the most important in your cryptocurrency transactions history. This also sets the foundational baseline for your crypto tax and bookkeeping as the fiat-crypto value and the particular time period would be set for future calculations of other taxable events. These transactions would also be the representation of your cost basis that determines future capital gains or loss on the exchange of crypto assets. Individuals will be subject to Capital Gains Tax based on your income and an annual allowance. If a tax is due it is only on the gain that you have made, not the entire amount you receive from the sale. You can also include transaction costs such as transfer fees when calculating your gain.

The annual tax-free allowance for an individual’s asset gains is £11,700 for 2018/19. If the profit from selling your cryptocurrency, in addition to any other asset gains, is less than this, you won’t have to report or pay tax on it.

Therefore, if cryptocurrency is bought and subsequently sold, any gain realised following conversion of the purchase and sale prices into the Sterling exchange rate (on the relevant dates of sale and purchase) is subject to CGT at the appropriate rates. It has to be noted though that the HMRC is not clear on the exchange of crypto to crypto either with a gain or loss as a non-taxable event. Henceforth, from my understanding, if you are not converting your crypto to fiat you won’t be due to pay any taxes up until the point of conversion back to fiat.

Charitable Donations:

Donating cryptocurrency to a tax-exempt organisation can prove to be a great way to donate to a good cause and reduce your tax bill by charitable deduction. There are a couple of main points here. The organisation has to explicitly state the direct acceptance of the particular currency as a donation. Secondly, you can’t cash in on your gains then donate afterwards as these are two separate events. The tax-exempt organization would receive your donation at full value then you can claim a charitable deduction to reduce your taxes afterwards.

Use Case II: Trading Crypto

In this use case, we are going to consider active investing in a short time period with numerous transactions or in other words trading. Speculation on the price of different cryptocurrencies has made millionaires of many while many times more people have gone broke. No matter, millionaire or broke the taxman is always there looking over waiting for its share. Thinking that you can dodge a bullet and let it pass a few years or liquidate back into fiat, later on, may backfire. On the flipside, those that lost a lot may be able to offset any losses to other types of income or tax for the particular period.

So how do you know if you are an investor buying/selling or a trader? HMRC apply a series of tests known as ‘The Badges of Trade’ to determine whether a trading activity has taken place. Different criteria are applied such as the volume of transactional activity, intention, the speed of transactions, organisations, debt, among others. Once you establish your standing then you would have to get in the appropriate entity subject to different tax treatments. For example, as an investor, you would be subject to Capital Gains Tax. On the other hand, if you are fully dedicated to trading cryptocurrencies full-time and registered as a business you will be subject to corporate tax on your business activities.  All transactions from fiat to crypto and back to fiat would be included in the cost basis for your tax calculation which ultimately would lead to the capital gain/loss amount that the Taxes will apply upon. The cost basis includes all transactions from crypto to crypto, fees, exchange transfers and it is calculated on the total fiat value. If you are trading part-time on the side as a sole trader this could be considered as subject to Income Tax that will take priority over Capital Gains Tax. An individual who is trading may be able to reduce their Income Tax or CGT liability by offsetting any losses from their trade against future profits or other income. More on this can be found on HMRC’s Losses: HS227 Self Assessment helpsheet

Trading in cryptocurrencies is exempt supplies for VAT purposes.

Crypto Gifts:

A philanthropic way to reduce your tax bill is by ”gifting” cryptocurrency. By making a P2P wallet transfer that is directly attributable to yourself or another person, not an exchange or a different entity, you can claim the ‘inheritance’ of this gift up to the allowable annual gift exclusion. Make a note of the value of the gift on the date of the gift in case you sell it in the future.

Wallet-Wallet & Exchange-Exchange transfers are not taxable events.

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Use Case III: Mining & Staking

The final use case we are going to consider is mining, staking, airdrops and other miscellaneous crypto activities. Cryptocurrencies mining is a process in which transactions from various forms of cryptocurrency are verified and added to the blockchain digital ledger. This process involves expensive computing hardware, free mining software and electricity consumption as a constant expense for the activity. The taxation of mining would depend on the degree of activity, the type of your organisation, commerciality and risks involved. In terms of mining, the size of your operation is critical for determining your tax liability. Whether your crypto mining activity gains should be considered as taxable events would depend on the commercial size. Are you running a business or ‘hobby mining‘? Mining as a business activity will be subject to corporation tax. Hence if you have a significant mining operation you would have to register as an LLC. Income received from Bitcoin mining activities will generally be outside of the scope of VAT.

Staking cryptocurrencies and receiving “interest” on your crypto staked could be seen as savings income. Airdrop is when a large number of cryptocurrency is distributed evenly into wallets within a set of given parameters. Tax treatment consideration is also given for this activity on a case by case basis, but free money invites taxes, you can ask any lottery winner.

Gambling Income Loophole

In the new policy paper, HMRC closed the loophole where an individual would be allowed to classify their investment in the cryptocurrency as “gambling”, winnings from which are tax-free.


To wrap up, I hope that this article has proven useful for understanding the different ways you can account for your annual tax liability coming from crypto activities. Remember that it is crucially important to keep records of your transactions. You can download trading history from your exchanges, though it will be good to keep an excel sheet or a folder with all the different transactions and receipts. Record keeping has to include the type of crypto asset, date of the transaction if they were bought or sold and the number of units. The value in pounds sterling, cumulative totals as well as bank statements and wallet addresses are very important. Keeping it simple is crucial to getting everything right especially if you are dealing with massive amounts of transactions and capital. Great tool to help you with filing your crypto taxes is https://tokentax.co/ . I am not affiliated with them nor is this a sponsored post, but they offer a good tool. Keeping it simple is crucial to getting everything right especially if you are dealing with massive amounts of transactions and capital. Whether sold for fiat, sold for another cryptocurrency or even sold to pay for a good/service. It is this selling of your cryptocurrency that triggers a ‘taxable event‘. This leads to a common strategy of many crypto-players to JUST HODL.

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Disclaimer: Opinions are my own and not the views of my employer. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.