Page 451 - TaxAdviser_2022

Under Notice 2014-21, the sales of virtual currency to pay the sponsor
fees, however, must still be treated as sales of capital assets that
result in capital gains or losses for the owners of the underlying
cryptocurrencies.

nonetheless still impose tax liabilities within the broad category of ETFs are metal commodities or bitcoin and ether
on these indirect owners. commodity funds, which are structured in the case of cryptoassets. This task
as trusts or partnerships that physically is handled and managed by the ETF
Virtual currency grantor trusts hold only a single type of commodity. sponsors, who act as administrators
and commodity ETFs ETFs are managed by a sponsor who and custodians, acquiring the assets on
An ETF is a type of investment fund enters contractual relationships with the investors’ behalf. Because the SEC
traded on a stock exchange, with the one or more authorized participants has yet to rule on whether cryptoassets
shares predominantly bought and sold in the financial markets — typically constitute investment contracts and are
from the owners of the fund rather broker-dealers who foster the sale of therefore subject to SEC regulation and
than the original issuing managing shares between buyers and sellers. market registration, there are currently
company. Typically, ETFs hold multiple The primary benefit of commodity no ETFs of cryptoassets available for
underlying assets, usually stocks, ETFs lies in the difficulty normal trade on any public exchanges within
which are ultimately chosen by the investors have in acquiring the the United States. There are, however, a
management company that determines underlying assets held by the ETF; for handful of ETF-like funds in existence
the “basket” of investments. Included example, gold or silver in the case of operating as closed-end grantor trusts,

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