mirrae

Continuation from Spending Crypto – Post #3

Since my last post I did some additional digging. My simple conclusion from Post #3 was ” I think the crypto regulations are not quite there to have the masses even entertain the practicality of using crypto in established economies.”

H.R. 5635: Virtual Currency Tax Fairness Act of 2020

The H.R. 5635 bill was introduced January 16, 2020 and simply put would not have any tax implications if you were to spend your crypto on same personal items where the gains of the individual sale were less that $200. This is promising, Grandma may be ok with this.

Gross income of an individual shall not include gain, by reason of changes in exchange rates, from the disposition of virtual currency in a personal transaction (as such term is defined in section 988(e)). The preceding sentence shall not apply if the gain which would otherwise be recognized on the transaction exceeds $200.

In addition, if passed, the H.R. 5635: Virtual Currency Tax Fairness Act of 2020 would be effective December 31, 2019. This would be very beneficial for those that want to use their crypto in everyday transactions and negates my conclusions from Spending Crypto – Post #3

Game on

I think moving forward with caution on this experiment is worth the effort, but just to be safe I will scale it down to less than $100 per month. We could always just extrapolate the findings at the end as if I were to spend as I usually do on a per month basis.

About the CryptoBack terms

I read the “fine print” if you will on the CryptoBack Debit Card. It noted that the Crypto you spend would be the Crypto you receive back. Fair enough, however the 3% crypto coming back would be deposited after 90 days of the original transaction.

Wow, that could be a risk. For example, lets say I spend 1 ETH on a transaction and it is $250, would that be 0.03 ETH back? Or would it be the equivalent of the $ dollar amount?

So $250 = 1 ETH at time of transaction, the $ dollar amount is $7.50.

If after
90 days, say ETH was $500:

Would it be 0.03 ETH = $15?

Would it be 0.015 ETH = $7.50?

If after 90 days ETH was $125:

Would it be 0.03 ETH = $3.75?

Would it be .06 ETH = $7.50?

Many question bouncing around in my head, but I wil keep posting updates over the next 6 months of the experiment.

All Spending Crypto series:

Spending Crypto – Post #1
Spending Crypto – Post #2
Spending Crypto – Post #3

Spending Crypto – Post #4

Spending Crypto – Post #5

Credits:

Photo by Dmitry Demidko on Unsplash

Continuation from Spending Crypto – Post #2

Wait we forgot something!

I could I have forgot about this. Am I so tunnel focused on the CryptoBack experiment that I forgot to mention buying crypto usually has a fee associated with it?

So besides the now complicated tax implications, we need to review how much it costs to buy crypto to pre-fund the debit card.

You know its not sounding like global adoption of crytos is going to happen soon, Grandma will not bother with this nonsense!

What does it cost to buy crypto then?
I have found between 1%-1.5% is about average on an exchange. Now, one could argue that a professional trader can do it for as little as 0.10% fee benefiting on the pro-exchanges maker/taker fee structure. But for the rest of us, not going to happen. You know its not sounding like global adoption of crytos is going to happen soon, Grandma will not bother with this nonsense!

This on ramp/off ramp exchange fee cost would basically neglect the 3% CryptoBack plan making this idea a potentially break even adventure. In addition, this could even be worse. A bear market environment could wipe out the crypto value surely losing you a lot of money!

However I do find it amusing to see tweets like these below and get caught up in the “what if” :0

Whats the conclusion?

My conclusion is that although its a great experiment I would love to deploy. I think the crypto regulations are not quite there to have the masses even entertain the practicality of using crypto in established economies. That's not to say that there is not a great use case in emerging economies or economies in distress to benefit from “Spending Crypto”. I think we already see that playing out in the world today. But more importantly, then there is this tweet:

..., then there is this tweet:

All Spending Crypto series:

Spending Crypto – Post #1

Spending Crypto – Post #2

Spending Crypto – Post #3

Spending Crypto – Post #4

Spending Crypto – Post #5

Credits:

Photo by Dmitry Demidko on Unsplash

Continuation from Spending Crypto – Post #1

What good is crypto if you don't use it?

So I started down the path, a journey contemplating of using crypto by spending crypto instead of using the 2% cash back credit card. Again I am going to spend that money anyway, why not be a pioneer in the crypto revolution.

There are a few debit cards out there where you can spend your crypto, I won't go into specific cards and the reward benefits they offer. I have narrowed it down to one I think is pretty good that offers a debit card that pays 3% CryptoBack and 1% CashBack* on all purchases. So should be easy to just start using the crypto card instead of the credit card!

Implementing the Cryptoback plan, same as the Spending Crypto – Post #1 experiment.

So I have prepared to start using the Cryptoback Debit Card and pre-funded my account (since this is not credit) with crypto. Still waiting on the card to arrive.

But I started to ask myself some questions:

1. Ok, I bought some crypto, pre-funding my card to spend. What tax implications will I have to deal with that spending with Credit Cards I did not have to contemplate?
2. What if the price goes down, crypto is pretty volatile?
3. Hey if it goes up in value that is just icing on the cake!
4. Wait, if the price goes down, and I need to refill my debit card by pre-funding again! What about a Wash Sale rule.

Pre-funded my account

Lucky me, I decided to pre-fund my account and am just now waiting on the debit card to arrive. (Does it really take this long? seems like its been a month) I say lucky me because since prefunding the account, the crypto has increase in value from $3,000 to $4,786 at the time of this writing. Wow that great, I guess waiting was a good thing. But what if it went the other direction!

Spending

The plan is to just use this crypto debit card just like my cash back card and reap the benefits of crypto back instead of cash back. But when you buy crypto and spend it, you incur a taxable event. This could be a capital gain or a capital loss. So every month I will just refill the account and go about my normal day but now I have to manage and track these tax implications.

What is a Wash sale?

Very simply, a wash sale is when you sell lets say crypto at $1.00, you can't buy it back before 30 days at lower than $1.00 without triggering the IRS Wash Sale rule. If you buy it back at anytime for anything above the original $1.00 price, you have no Wash Sale worries.

https://en.wikipedia.org/wiki/Wash_sale

Does that even apply to crypto? I am not sure.

Well to avoid this rule I could:

1. Pre-fund my Debit card 2 months of spending ($6,000) and after 30 days pre-fund again the normal $3,000 spending monthly moving forward.
2. Utilize more than just 1 crypto. By rolling from say XRP to ETH to Dash to BTC etc... I could just fund weekly and swap between them and not buy again until after 30 days time elapses for each one.
3. Get very lucky and never have to worry about the IRS Wash Rules cause the crypto is always more expensive than the original buy price. (hahahaha, I wish)

So what do you do think, which one above is best? Give me a tweet @mirraeinc on twitter

Wait we forgot something!

Wait we forgot something! Read Spending Crypto – Post #3 to find out.

All Spending Crypto series:

Spending Crypto – Post #1

Spending Crypto – Post #2

Spending Crypto – Post #3

Spending Crypto – Post #4

Spending Crypto – Post #5

Credits:

Photo by Dmitry Demidko on Unsplash

I have been thinking about documenting a journey, a crypto spending journey. What good is cryptocurrency if you are not using it?

There are quite a few questions and topics I have been contemplating so lets take a look.

Credit Card Life Hacks

For the past 2 years I have been implementing a credit card points program. Look anywhere on the internet and you can find individuals discussing how you can benefit from credit cards that offer a points program.

There are many different types of programs, the most popular are Airline Miles Points for redeeming for travel and % back credit cards. If you have the time and are organized you can definitely game the system, but not by a enormous amount and I would question the time and effort put in does not cover the benefits you receive.

I have flown over 20 free round trip flights over the years from gathering Airline Miles from business travels. That is the best case since the company pays for the travel and I collect the bonus of miles I can use personally.

Another reward card, the cash-back type cards are great as well, but many have like a 1% cash back on everything and then keep rolling higher percentages for special items like groceries, gas or dining ranging from 2% to 5% cash back. But again, time and effort is needed to get the most benefits. Who has time for all that?

What's in your wallet!

I'm sure you have seen the Capital One credit card commercials.

https://www.youtube.com/watch?v=1pfjjPVWy84

Why would they do this? Cash back on items I would buy anyway!

Credit card companies charge the retailers that accept credit cards for payment a range that averages out to about 3%. So if you get a credit card with say 2% cash back, the credit card company makes 1%. So now companies entice consumers to use their card and increase there consumer base and hence make more money by the sheer market share. Win-Win right!

Well if you think that's a win for everyone, I would have to explain to you why “Free Shipping” isn't free ;–)

Other conspiracy theory's would try to convince you the credit card companies are tied to the power that be. They want to go to a cashless society and this is the long game transitioning people with incentives to use the cards instead.

My 2 year experiment results

I started 2 years ago. I settled on a simple 2% back on everything card since there would be no effort monitoring the rolling cash back promotions. Time is money and a few percentage gain would be a drop in the bucket. Also, using multiple cards, one for gas @5% back, one for groceries @3.5% back and one for all others at 2% would be a billing/paying challenge to keep track.

I chose the simplest route, 2% on everything.

Interestingly, the results are good but much less than others may lead you to believe. We have averaged spending a little more than $2,900 a month on the cash back credit card. We pay this off every month and roll the cash back bonus into the next statement reducing the actual statement balance. Its been easy, and quite honestly I am surprised that I really never carry cash anymore. Maybe there is something to the conspiracy theory above ;–)!

The results are in: about $800 per year in cash back rewards. Hey ... who would not want a little extra cash back when I would have spent that money anyway using cash!

So what does this have to do with spending crypto?

If this can be successful on cash, why not try this experiment with crypto.

Read Spending Crypto – Post #2 to find out.

All Spending Crypto series:

Spending Crypto – Post #1

Spending Crypto – Post #2

Spending Crypto – Post #3

Spending Crypto – Post #4

Spending Crypto – Post #5

Credits:

Photo by Dmitry Demidko on Unsplash

Photo by Christiann Koepke on Unsplash

If this is a typical bus ride to school, I appreciate the bus drivers of the world for having to deal with this :)

https://www.cinnamon.video/mirrae/watch?v=224766772438369370