The Great Crypto Crash of 2021 happened last month, and the world is still wondering if the bull market will come back this year. Unless you live underground, you have probably heard of Bitcoin and some kind of money called cryptocurrency. Cryptocurrency as money, and even as a speculative instrument, aka a security, are widely accepted concepts, but how many of you appreciate the relationship between cryptos and the insurance industry?
Crypto Car Insurance
There are car insurance companies, like USAA, that also function as crypto friendly banks. These insurers obviously accept payment in cryptocurrencies. Basically, any car insurance company that accepts payments through Visa card is connected to cryptocurrencies because Visa now accepts payment in Ethereum.
This has gravitational implications because all car owners, at the minimum, need collision coverage, aka liability coverage, liability insurance or collision insurance, because if they have a car accident that is determined to be a fault accident on their part, they are responsible for any bodily injury or property damage caused. In addition, some motorists, for peace of mind, may choose to have additional coverage in the form of comprehensive insurance for an auto policy that provides full coverage, aka comprehensive coverage, for a variety of unforeseen events in addition to car accidents: vandalism, theft, floods, earthquakes, hurricanes, tornadoes, etc. Even with the best full coverage, there will still be deductibles, so that should be factored into every comprehensive car insurance quote.
Regardless of the type of coverage, it’s imperative that the auto policy owner understand that the cryptocurrency market can affect the car insurance provider. This is because cryptocurrency is not only a new form of money. The Securities and Exchange Commission (SEC), in their lawsuit against Ripple (XRP), asserts that cryptocurrencies are also securities, subject to same regulations as stocks and bonds. Because cryptocurrencies can be considered securities, and highly volatile ones at that, your car insurance provider may be greatly affected when its customers have been making their payment in cryptos. Being that we have just recently had a 50% correction in the cryptocurrency market, some of these payments may have already been greatly reduced in value. Because cryptocurrencies are a little over ten years old, auto policy providers might not have an effective plan for managing such extreme fluctuations in currency value. Basically, insurance companies that accept crypto payments are really a social experiment.
Cryptocurrencies are valuable as securities and can, themselves, receive some type of optional coverage in the form of an insurance policy. From the moment a cryptocurrency is sold for a profit, it becomes a taxable event with full tax liability, regardless of whether the capital gains are converted into any type of various fiat currencies or left on the crypto exchange as some type of stable coin, like Tether (USDT). Any of the major exchanges would provide the crypto trader with a full trade history by the end of the year, so a tax report could be prepared for the IRS and the appropriate state tax agency for that particular tax year.
Although the crypto trader could hire a tax professional, like a CPA, to help calculate the tax liabilities for his tax return, he or she may want to consider some type of crypto tax software before touching that tax form. Best Crypto tax software, as a concept, is really a matter of opinion, but there are plenty out there: Turbotax, Cointracker, Cryptotrader.tax, Tokentax, Taxbit, Zenledger, etc. The IRS form and all other tax documents are included in the tax software. The important thing to understand is that cryptocurrency taxes are subject to the same tax liabilities as taxes related to fiat currencies and are the sole financial responsibility of the crypto trader and not the tax accountant, the tax attorney, or the crypto tax software company.