Ed Froelich spoke to Law360 about what token holders should be aware of when deciding whether to commit to a cryptocurrency contract.
According to Ed, a contract that involves cryptocurrency requires the normal contractual components of an offer, consideration and acceptance. However, token holders also need to understand that the transfer, sale, purchase, or exchange of cryptocurrency also has tax consequences that need to be reported.
He added that if a contract uses cryptocurrency as payment for a service or a good, then the holder would have to make sure they knew the basis in the token when they received it, then subtract that basis from the value of the good or service to determine the gain or loss that must be reported.
"From the tax point of view, you're using a piece of property that has a basis...and there's a tax event that happens every single time when you, the buyer, use it," Ed said.
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