Waters clearing?
With the hype of crypto mania cooling down, bitcoin and other cryptos becoming more or less known beasts for ordinary people, while millions owning some and trading, the regulators around the world are starting to calm down also...
@devkapoor423
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The most discussed country, obviously is the US: here the cryptos are treated as property, hence any capital gain taxable, and payments/receipts/investments collected in crypto considered a taxable income on the level of recipient entity (physical or legal).
Below is the list published on a CNBC article, that does not need much interpretation :
- Trading cryptocurrencies produces capital gains or losses, with the latter being able to offset gains and reduce tax.
- Exchanging one token for another — for example, using Ethereum to purchase an altcoin — creates a taxable event. The token is treated as being sold, thus generating capital gains or losses.
- Receiving payments in crypto in exchange for products or services or as salary is treated as ordinary income at the fair market value of the coin at the time of receipt.
- Spending crypto is a tax event and may generate capital gains or losses, which can be short-term or long-term. For example, say you bought one coin for $100. If that coin was then worth $200 and you bought a $200 gift card, there is a $100 taxable gain. Depending on the holding period, it could be a short- or long-term capital gain subject to different rates.
- Converting a cryptocurrency to U.S. dollars or another currency at a gain is a taxable event, as it is treated as being sold, thus generating capital gains.
- Air drops are considered ordinary income on the day of the air drop. That value will become the basis of the coin. When it's sold, exchanged, etc., there will be a capital gain.
- Mining coins is considered ordinary income equal to the fair market value of the coin the day it was successfully mined.
- Initial coin offerings do not fall under the IRS's tax-free treatment for raising capital. Thus, they produce ordinary income to individuals and businesses alike.
- Exchanging one token for another — for example, using Ethereum to purchase an altcoin — creates a taxable event. The token is treated as being sold, thus generating capital gains or losses.
- Receiving payments in crypto in exchange for products or services or as salary is treated as ordinary income at the fair market value of the coin at the time of receipt.
- Spending crypto is a tax event and may generate capital gains or losses, which can be short-term or long-term. For example, say you bought one coin for $100. If that coin was then worth $200 and you bought a $200 gift card, there is a $100 taxable gain. Depending on the holding period, it could be a short- or long-term capital gain subject to different rates.
- Converting a cryptocurrency to U.S. dollars or another currency at a gain is a taxable event, as it is treated as being sold, thus generating capital gains.
- Air drops are considered ordinary income on the day of the air drop. That value will become the basis of the coin. When it's sold, exchanged, etc., there will be a capital gain.
- Mining coins is considered ordinary income equal to the fair market value of the coin the day it was successfully mined.
- Initial coin offerings do not fall under the IRS's tax-free treatment for raising capital. Thus, they produce ordinary income to individuals and businesses alike.
* - https://www.cnbc.com/2018/01/30/cryptocurrency-and-taxes-what-you-need-to-know.html
While most of the above may seem logical, the very fact that cryto-money-currency is treated so aggressively (Americans once again have proved they wont play games with things that are not black and white) leads to perhaps a simple-stupid question: why? While most regulators consider exchange gain differences not taxable, with crypto currencies certainly this "assumption" is not holding. Furthermore, should we try distinguishing between the types of crypto "assets" one holds as coins/currencies or utility tokens (latter presumably not to be considered as currency), we would certainly make things much more complicated.
To put more "oil into this fire", a simple person like businesses should also start thinking about accrual or cash accounting, valuation, ownership aspects, and many more to make sure s/he stays compliant when his "Judgement day" comes... Some tax lawyers are most likely smiling while reading, and calculating "gift-gains" for quite some time into unforeseeable future, hoping this ambiguity would last...
Perhaps for individuals this could be more or less manageable risk, with regulators hopefully becoming more "reasonable" and less irritated with the crypto: even IMF is starting to understand the importance of technology when it comes to such an old institute as issuing of the fiat currencies by sovereign states, suggesting that they should start considering a shift to digital money.
I believe we should consider the possibility to issue digital currency. There may be a role for the state to supply money to the digital economy.
This currency could satisfy public policy goals, such as (i) financial inclusion, and (ii) security and consumer protection; and to provide what the private sector cannot: (iii) privacy in payments.
This currency could satisfy public policy goals, such as (i) financial inclusion, and (ii) security and consumer protection; and to provide what the private sector cannot: (iii) privacy in payments.
* - "Winds of Change: The Case for New Digital Currency", By Christine Lagarde, IMF Managing Director, Singapore Fintech Festival, November 14, 2018
The main concern, perhaps, should be with businesses and their owners, who although in "water" up to their necks, however, need to be afraid of the pouring rain that comes or is going to come onto their heads. In most cases, as the same USA experience suggests, the regulator would try to bypass "limited liability" aspect of running a business, and go after the "braves"...
The hope, how fragile it may be, is for our societies for whom our regulators and governments work, would slowly but steadily take a lead and defend the emerging peer to peer economy that finally may break the monopoly of corporate world owning our very destiny for sooo long. We all deserve a better future: let's do our work to make it happen!
* - cover image: freepik.com