Xuan-Thao Nguyen (Washington) & Jeffrey A. Maine (Maine), Crypto Losses, 2024 U. Sick. L. Rev. __ :

The crypto business has been hit laborious with numerous market forces and scams, leaving traders with trillion-dollar losses lately. The suitable tax remedy of such losses has but to be totally examined, as there may be scant steering and a dearth of educational literature on the topic. This Article makes an attempt to fill this hole by making use of basic tax rules to crypto losses and making a number of suggestions to enhance the readability and consistency of tax outcomes. 

It explores numerous theories of crypto loss “realization” (together with theft, abandonment, and worthlessness), highlighting the place further steering is required. And it considers applicable legislative limits on crypto loss deductions recognizing that, by providing a tax deduction subsidy, the federal government primarily shares within the danger created by crypto actions. The Article proposes a potential new tax framework for crypto losses—particularly, crypto losses ought to be deductible solely towards crypto good points and never towards labor or different constructive revenue. Such a rule wouldn’t be based mostly on ethical disapproval of crypto buying and selling versus different funding exercise, however as a substitute could be supported by the unified justification underlying many loss limitation guidelines in our tax system.

https://taxprof.typepad.com/taxprof_blog/2023/05/crypto-losses.html