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TORONTO, March 29, 2021 (GLOBE NEWSWIRE) — Digihost Technology Inc. (“Digihost” or the “Company”) (TSXV: DGHI; OTCQB: HSSHF) is pleased to announce the acquisition of 700 Bitmain S17+ 76TH miners for a total purchase price of US$4.025 million, that would increase the Company’s hashrate by 50PH, or approximately 20% in the second quarter of 2021. The Bitmain S17+ miners are scheduled for delivery in early April and will be deployed immediately.
The addition of the 700 Bitmain S17+ miners, based on the current price of Bitcoin (“BTC”) and level of mining difficulty, would increase the Company’s monthly mined BTC by approximately 9 BTC, which would translate to an additional US$400,000 of operating profit per month. The new miners will be installed at the Company’s existing mining facility in Upstate New York.
Michel Amar, the Company’s CEO, stated: “We continue to aggressively pursue every new opportunity that aligns with our goal to expand operations through the strategic acquisition of Bitcoin miners and low-cost sources of clean energy. The acquisition and immediate deployment of these new miners is the first in, what we expect to be, many new acquisitions going forward. We are excited to implement our plan to utilize the expanded 3EH hashing capacity from our recently announced acquisition of a 60MW power plant (press release: March 24, 2021), where it is expected that the Company’s energy cost would be further reduced by up to 40%.”
The total purchase price of US$4,025,000 will be comprised of cash consideration of US$2.975 million and issuance to the vendor of 533,781 common shares of the Company with a deemed value of US$1,050,000 (CAD$1,329,114 (CAD$2.49 per share)). The securities issuable in connection therewith will be subject to a statutory four month and a day hold period, and will be subject to TSX Venture Exchange and all required regulatory approvals.
About Digihost Technology Inc.
Digihost Technology Inc. is a growth-oriented blockchain technology company primarily focused on Bitcoin mining. The Company’s mining facilities are located in Upstate New York, and are equipped with 78.7 MW of low-cost power with the option to expand to 102MW. The Company is currently hashing at a rate of 190PH with potential to expand to a rate of 3EH.
For further information, please contact:
Digihost Technology Inc.
www.digihost.ca
Michel Amar, Chief Executive Officer
Email: michel@digihost.ca
Cautionary Statement
Trading in the securities of the Company should be considered highly speculative. No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein. Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Forward-Looking Statements
Except for the statements of historical fact, this news release contains “forward-looking information” within the meaning of the applicable Canadian securities legislation that is based on expectations, estimates and projections as at the date of this news release. “Forward-looking information” in this news release includes information about potential further improvements to profitability and efficiency across mining operations including as a result of acquisitions of equipment and infrastructure, potential for the Company’s long-term growth, and the business goals and objectives of the Company. Factors that could cause actual results to differ materially from those described in such forward-looking information include, but are not limited to: the ability to obtain regulatory approval for and complete acquisitions of equipment and infrastructure on the terms as announced or at all; the ability to successfully integrate the acquisitions of equipment and infrastructure on an economic basis or at all; continued effects of the COVID19 pandemic may have a material adverse effect on the Company’s performance as supply chains are disrupted and prevent the Company from operating its assets; a decrease in cryptocurrency pricing, volume of transaction activity or generally, the profitability of cryptocurrency mining; further improvements to profitability and efficiency may not be realized; the digital currency market; the Company’s ability to successfully mine digital currency on the cloud; the Company may not be able to profitably liquidate its current digital currency inventory, or at all; a decline in digital currency prices may have a significant negative impact on the Company’s operations; the volatility of digital currency prices; and other related risks as more fully set out in the Annual Information Form of the Company and other documents disclosed under the Company’s filings at http://www.sedar.com. The forward-looking information in this news release reflects the current expectations, assumptions and/or beliefs of the Company based on information currently available to the Company. In connection with the forward-looking information contained in this news release, the Company has made assumptions about: the current profitability in mining cryptocurrency (including pricing and volume of current transaction activity); profitable use of the Company’s assets going forward; the Company’s ability to profitably liquidate its digital currency inventory as required; historical prices of digital currencies and the ability of the Company to mine digital currencies on the cloud will be consistent with historical prices; and there will be no regulation or law that will prevent the Company from operating its business. The Company has also assumed that no significant events occur outside of the Company’s normal course of business. Although the Company believes that the assumptions inherent in the forward-looking information are reasonable, forward-looking information is not a guarantee of future performance and accordingly undue reliance should not be put on such information due to the inherent uncertainty therein.
VANCOUVER, British Columbia, March 22, 2021 (GLOBE NEWSWIRE) — DMG Blockchain Solutions Inc. (TSX-V: DMGI) (DMGGF:OTCQB US) (FRANKFURT:6AX) (“DMG” or the “Company”), a vertically integrated blockchain and cryptocurrency technology company, today announces the purchase and immediate operation of 2,915 bitcoin ASIC miners, which is an additional approximate 200 PH/s, with a possibility of 2,500 more ASIC miners from the same supplier (totalling an additional 170 PH/s).
As previously announced, DMG is in the process of retrofitting the first 30 MW of infrastructure to immersion cooling (which can produce approximately 1.0 EH/s of Bitcoin mining), to be completed in the first half of 2021 with another 30 MW to follow in the second half-year (totaling 2.0 EH/s).
DMG is currently in negotiations with other leading Bitcoin mining equipment manufacturers for further purchase orders in accordance with its retrofitting efforts, which would allow additional purchases through the rest of 2021 to meet the Company’s hashrate targets.
“DMG’s goal is to provide thought leadership to the cryptocurrency industry, which is why we are focussed on strategies around vertical integration, governance, compliance, and efficiency; hence, our focus on physical technologies such as immersion cooling, along with software technologies found in our Blockseer platforms,” said DMG’s COO, Sheldon Bennett. “DMG has leveraged its long-time industry contacts to find supply in a hot market when, along with the 2,915 miners we have secured, we have a right of first refusal on an additional 2,500 miners from the same supplier.”
As DMG secures further orders to fully occupy its 85MW flagship facility, the Company will explore the idea of multiple other Bitcoin mining sites to allow for additional hashrate growth in 2022 over and above the previously announced 2021 target of 2.0 EH/s.
Beyond the growth of DMG’s cryptocurrency mining footprint, the Company is also continuing to grow its software stack (including clean block mining on the Blockseer Pool), automated management of its mining assets with Blockseer Mine Manager, and tool sets for AML and KYC in Walletscore. Further, the Company seeks to expand into cryptocurrency transactions and integration with traditional financial institutions and crypto-focused exchanges.
About DMG Blockchain Solutions Inc.
DMG is a vertically integrated blockchain and cryptocurrency company that manages, operates, and develops end-to-end digital solutions to monetize the blockchain ecosystem. DMG’s businesses are segmented into three main divisions: data centre operations, data analytics and forensics and developing enterprise blockchains. DMG’s data centre operations focus on earning revenues from block rewards and transaction fees by mining primarily bitcoin as well as providing hosting services for industrial mining clients. DMG’s data analytics and forensic services provide technical expertise software products such as Blockseer Pool, Mine Manager and Walletscore, as well as working with auditors, law firms, and law enforcement organizations. DMG’s permissioned blockchain technology is focused on developing enterprise software for the supply chain management of controlled products. DMG’s strategy is to become the domain experts across the business verticals it focuses on. DMG’s management team includes seasoned crypto experts, forensic & financial professionals and blockchain developers with deep relationships throughout the industry.
Future changes in the Bitcoin network-wide mining difficulty rate or Bitcoin hashrate may materially affect the future performance of DMG’s production of Bitcoin, and future operational results could also be materially affected by the price of Bitcoin and an increase in hashrate mining difficulty.
For more information on DMG Blockchain Solutions visit: www.dmgblockchain.com
On behalf of the Board of Directors,
Daniel Reitzik, CEO & Director
For further information, please contact:
DMG Blockchain Solutions Inc.
Email: investors@dmgblockchain.com
Web: www.dmgblockchain.com
For Media Inquiries:
Jules Abraham, Head of Public Relations
CORE IR
917-885-7378
julesa@coreir.com
Investor Relations Contact:
CORE IR 516-222-2560
Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
Cautionary Note Regarding Forward-Looking Information
This news release contains forward-looking information or statements based on current expectations. Statements about the Company’s plans for the acquisition of additional Bitcoin miners, plans and goals to increase petahash (PH) by self-mining, completion of retrofitting of the facility, acquiring other facilities, price of bitcoin, plans and intentions, other potential transactions, acquisition of customers, product development, events, courses of action, and the potential of the Company’s technology and operations, among others, are all forward-looking information. Forward-looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations or intentions regarding the future. Such information can generally be identified by the use of forwarding looking wording such as “may”, “expect”, “estimate”, “anticipate”, “intend”, “believe” and “continue” or the negative thereof or similar variations. The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company, including but not limited to, business, economic and capital market conditions; the ability to manage operating expenses, which may adversely affect the Company’s financial condition; the ability to remain competitive as other better financed competitors develop and release competitive products; regulatory uncertainties; access to equipment; market conditions and the demand and pricing for products; the demand and pricing of bitcoins; security threats, including a loss/theft of DMG’s bitcoins; DMG’s relationships with its customers, distributors and business partners; the inability to add more power to DMG’s facilities; DMG’s ability to successfully define, design and release new products in a timely manner that meet customers’ needs; the ability to attract, retain and motivate qualified personnel; competition in the industry; the impact of technology changes on the products and industry; failure to develop new and innovative products; the ability to successfully maintain and enforce our intellectual property rights and defend third-party claims of infringement of their intellectual property rights; the impact of intellectual property litigation that could materially and adversely affect the business; the ability to manage working capital; and the dependence on key personnel. DMG may not actually achieve its plans, projections, or expectations. Such statements and information are based on numerous assumptions regarding present and future business strategies and the environment in which the Company will operate in the future, including the demand for its products, the ability to successfully develop software, that there will be no regulation or law that will prevent the Company from operating its business, anticipated costs, the ability to secure sufficient capital to complete its business plans, the ability to achieve goals and the price of bitcoin. Given these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements.
The securities of DMG are considered highly speculative due to the nature of DMG’s business.
Factors that could cause actual results to differ materially from those in forward-looking statements include, failure to obtain regulatory approval, the continued availability of capital and financing, equipment failures, lack of supply of equipment, power and infrastructure, failure to obtain any permits required to operate the business, the impact of technology changes on the industry, the impact of Covid-19 or other viruses and diseases on the Company’s ability to operate, secure equipment, and hire personnel, competition, security threats including stolen bitcoins from DMG or its customers, consumer sentiment towards DMG’s products, services and blockchain technology generally, decrease in the price of Bitcoin and other cryptocurrencies, failure to develop new and innovative products, litigation, increase in operating costs, increase in equipment and labor costs, failure of counterparties to perform their contractual obligations, government regulations, loss of key employees and consultants, and general economic, market or business conditions. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement. The reader is cautioned not to place undue reliance on any forward-looking information. The forward-looking statements contained in this news release are made as of the date of this news release. Except as required by law, the Company disclaims any intention and assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Additionally, the Company undertakes no obligation to comment on the expectations of, or statements made by third parties in respect of the matters discussed above.
The United States Internal Revenue Service is blinded by its desire to defeat cryptocurrency. It rushes to enforcement without first thinking how best to get there. It has spent millions of taxpayer dollars training its personnel and procuring private contractors to uncover noncompliance by crypto users. The IRS is arming its people to aggressively enforce the tax laws applicable to cryptocurrency. All the while, it ignores “established” frameworks to help achieve tax compliance and collection on crypto transactions.
Crypto tax amnesty is the easiest and fairest way to get from point A to point B, yet the IRS prefers unfair and aggressive tactics that disproportionately affect one population of taxpayers — the young.
That framework, a well-publicized amnesty program, began over 10 years ago. There is already a fine blueprint to follow. In March 2009, the IRS announced a foreign tax amnesty program named the Offshore Voluntary Disclosure Program, or OVDP. The program came in response to U.S. taxpayers not disclosing their foreign bank accounts and not reporting billions of dollars in tax on foreign income. In exchange for voluntary disclosure and payment of tax, OVDP offered taxpayers an opportunity to avoid criminal prosecution and pay far smaller penalties (sometimes, none at all). Without OVDP, taxpayers faced jail time and a variety of draconian civil penalties. The program was a great success — in just seven months, some 15,000 disclosures were made, netting nearly $3.5 billion in back taxes, penalties and interest.
Seeing the utility of OVDP, the IRS extended the program through several iterations. In total, some 56,000 taxpayers came forward and the IRS collected more than $11 billion in back taxes, interest and penalties. Even the worst prognosticator could predict a similar result with a crypto tax amnesty program. Consider this: There is a crypto “tax gap” of $25 billion dollars, nearly 37 million Americans now own some form of cryptocurrency, and the compliance rate is only about 50%.
The tax gap is wide enough, the population is many, and the compliance rate is dismal. Because of this, crypto tax amnesty could produce far more disclosures than OVDP and collect many more tax dollars. The similarities are apparent, but several key differences further favor crypto amnesty.
Crypto user demographics
The first difference lies in the demographic of crypto users. Nearly 60% of Bitcoin (BTC) users are under 35 years old, 17% of whom are barely out of high school, currently in their early 20s. This is important because this demographic is by far the least experienced group of taxpayers. Unlike taxpayers engaging in transactions abroad, millennials are the least likely to recognize the nuances of reporting capital gains and losses, limits on capital losses, disallowance of capital expenditures, carryover losses, stepped-up basis, carry-over basis and adjustments to basis, and the list goes on and on.
Despite this inexperience and youth, the IRS refuses to offer crypto users a tax amnesty program. Instead, the IRS offered tax amnesty to a far more experienced group of taxpayers engaging in foreign transactions. These taxpayers are far more likely to understand the nuances of tax law and employ tax attorneys and CPAs, and are more often tax “cheats,” whereas crypto evaders are often inadvertent. Despite this, the IRS unscrupulously targets the least-experienced demographic.
Related: Crypto could save millennials from the economy that failed them
There is yet more unfairness beyond the simple demographic. Foreign Bank Accounting Reporting, or FBAR, is a foundationally solid area of tax law, while cryptocurrency taxation is not. Fairness dictates that amnesty should be offered upon the simple fact that cryptocurrency taxation is often misunderstood, and is a new and emerging area of tax law. The rules are not well settled, and the current IRS guidance only consists of two IRS Notices and a set of FAQs — neither of which, by the way, are legally binding on the IRS. That is, a crypto taxpayer can not legally rely on them. Until legally binding guidance is released and the rules better developed, crypto tax amnesty is the fairest solution.
The crypto demographic is further handicapped by the fact that third-party reporting of crypto transactions is virtually nonexistent (only two of the nine U.S.-based cryptocurrency exchanges have published policies on transactional reporting). In other contexts, taxpayers can rely on annual 1099s or brokerage statements to report their basis and capital gains or losses. This is not available to most taxpayers in their 20s who are engaging in cryptocurrency transitions and likely only accustomed to simple W-2 tax returns. Rather, they must sit down with a pencil and paper and track spot prices (with no NYSE to rely on), determine fair market values, adjust their basis, and calculate their gains and losses across multiple exchanges at different times with different fees.
Crypto tax forms
Coinbase, one of the largest and most popular exchanges, just switched from issuing 1099-K forms to 1099-MISC forms. This is significant because the reporting thresholds for the latter are much lower. For Forms 1099-K, there is a reporting obligation if the taxpayer exceeds 200 transactions or a $20,000 threshold. In contrast, 1099-MISCs are issued if a taxpayer receives more than just $600 in payments during the year. Now, because of lower thresholds, tens of thousands more taxpayer names are being provided to the IRS — all without a mention of basis. Until third-party reporting of cryptocurrency is in line with other capital transactions, crypto tax amnesty is the fairest solution.
Or worse yet, perhaps some young taxpayers are paid in cryptocurrency or buy and sell products using cryptocurrency. In that instance, they must calculate a reasonable FMV for the cryptocurrency changing hands at different times — all the while tracking their basis. It is not difficult to imagine a young taxpayer keeping a constant log of cryptocurrency received for services rendered or exchanged goods, making proper FMV adjustments across multiple exchanges at different times.
If a person receives Bitcoin on Day 1 in exchange for selling a video game, and then receives Bitcoin on Day 2 for selling a pair of sunglasses, he must calculate the FMV of the Bitcoin earned at different intervals, less basis, all with a solid understanding of the impact of self-employment tax and the need to pay estimated taxes. The young taxpayer’s logbook may rival that of a long-haul trucker. The missteps here are many, and crypto tax amnesty is the fairer solution, much fairer than crypto-based, self-employment tax audits.
To add salt to the wound, there is still no IRS de minimis rule for crypto transactions involving even the smallest purchase of property. Arguably, the young taxpayer could incur a capital gain when he buys a pack of gum with XRP (a pack of gum costs $1.50 and Ripple trades around $0.50). Because he received a thing of value beyond the XRP he paid, he has a capital gain. In this regard, the current IRS regime teeters on the brink of absurdity.
And finally, the IRS guidance on cryptocurrency taxation makes not one mention of penalties for noncompliance, while FBAR guidance is laden with discussions of penalties. Until a sensible de minimis exception is enacted, and until the IRS adequately educates young crypto users on noncompliance penalties, crypto tax amnesty is the fairest solution.
The Taxpayer Bill of Rights
The Taxpayer Bill of Rights addresses this very problem of unfairness, shouting amnesty at the top of its lungs.
The Right To Be Informed, says:
“Taxpayers have the right to know what they need to do to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices, and correspondence. They have the right to be informed of IRS decisions about their tax accounts and to receive clear explanations of the outcomes.”
The Right to a Fair and Just Tax System, says:
“Taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their underlying liabilities, ability to pay, or ability to provide information timely.”
The IRS meets its burden with FBAR but fails miserably with its tax policies on cryptocurrency. It attacks the least experienced taxpayer but rewards the most experienced. It warns the most experienced taxpayers about penalties but leaves the least experienced guessing. It ignores that third-party reporting offers young taxpayers no quarter. It imposes complex tax nuances on the simplest demographic, and it disregards the foolishness of auditing that pack of gum.
Crypto tax amnesty has gotten little fanfare because the right people are not concerned — it is a young person’s tax problem. Big banks and large corporations cared about foreign bank account reporting and a tax amnesty program emerged, but crypto users have no centralized backing to support them. In fact, their very existence is based on decentralization. Unfortunately, until the “right” people are affected, crypto tax amnesty is unlikely. But if institutional integrity holds meaning, the IRS should extend the olive branch — notwithstanding the absence of the “big hitters.”
Mr. IRS Commissioner, with all due respect, open the borders and offer amnesty to this flood of young taxpayers. A fair and just tax system demands it.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Jason Morton practices law in North Carolina and Virginia and is a partner at Webb & Morton, PLLC. He is also a Judge Advocate in the Army National Guard. He focuses on tax defense and tax litigation (foreign and domestic), estate planning, business law, asset protection and the taxation of cryptocurrency. He studied blockchain at the University of California-Berkeley and studied law at the University of Dayton and George Washington University.
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