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- Locking BTC into Hashi and receiving hBTC likely does not trigger U.S. taxes.
- hBTC reflects ownership of the same Bitcoin, not a separate asset.
- Tax applies only when users sell or transfer their economic interest.
Attorneys at Fenwick outline how U.S. federal income tax law may apply to a new crypto structure. The focus centers on locking Bitcoin through Hashi and receiving a linked receipt token called hBTC. This model supports the use of native Bitcoin in financial products on the Sui network.
The attorneys note that current tax law does not directly address this setup. Still, existing principles provide a clear path. When users deposit BTC into a Hashi wallet, they receive hBTC as proof of ownership. This process does not involve swapping BTC for another asset.
It only creates a digital record that reflects the same holding. Tax rules apply when a sale or exchange of property occurs. In this case, no such event takes place. The user retains beneficial ownership of the Bitcoin. The hBTC token only tracks that ownership in another format.
Hashi Uses Decentralized System for Bitcoin Security
Hashi employs a decentralized mechanism for securing Bitcoin deposits. The mechanism is based on the Multi-Party Computation technology. Validators of the Sui blockchain share the key fragments. None of them can take complete control over the assets. When locking the Bitcoin in Hashi, a receipt token named hBTC is created.
The holder can then unlock their cryptocurrency using the token. The architecture guarantees that the initial asset will always stay with its owner. As stressed by the lawyers, no transfer of ownership occurs throughout the whole process. Thus, the holder of hBTC bears all the risks related to changes in the price of Bitcoin.
The characteristic influences the taxation status of the deal. The transaction can’t be taxed or classified as an exchange since the owner’s economic position hasn’t changed. The model is similar to typical ownership proofs. The receipt serves as proof of ownership without transferring any property.
Bitcoin and hBTC Maintain the Same Risks and Benefits
Taxation under U.S. tax laws needs to demonstrate a material difference of property. In court cases, a material difference refers to a change in legal right or economic position. With respect to the Hashi structure, hBTC does not create a new legal right, but rather, is reflective of the underlying Bitcoin holder’s ownership right.
Even where an exchange might be said to occur, there will still be alignment of rights and risks associated with the underlying Bitcoin and the hBTC. Such an analysis means that there will be no tax consequence upon depositing or withdrawing from the Hashi system.
Tax-wise, it appears that Hashi users will not be taxed when making deposits or withdrawals using their Bitcoin via Hashi. A taxable event would arise if the user were to sell off the hBTC in which case the sale would simply be an exchange of Bitcoin.
Also Read: Bhutan Moves Millions in Bitcoin Now Again as Hidden Transfers Spark Sale Fears!
