Say Kraken and Bitstamp both issue colored coins for USD, called KrakenDollars and BitStampDollars. Then I find an colored coins exchange where I can trade between the two, and deposit some KrakenDollars. In the eyes of the IRS, these are still dollars I think. Then I start trading between KrakenDollars and BitStampDollars, and make a respectable profit. Then I put my KrakenDollars back into Kraken, and withdraw to my bank account. How on earth should that be taxed? I was just trading between dollars and dollars...

1 Answer 1


You trade a bunch of stuff, you wind up with more dollars than you started with, you have a taxable profit.

  • Don't you have to tax each trade based upon the price at the time and whether it's a short term or long term gain/loss?
    – lurf jurv
    Jul 6, 2014 at 13:47
  • @lurfjurv That's going to depend on your jurisdiction, but often no. That would be a like-kind exchange. Jul 6, 2014 at 23:20

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.