CONFUSION IN CRYPTOCURRENCY TAXATION
November 2, 2020 - Douglas Myser
Confusion in cryptocurrency taxation. Venezuela is hoping that cryptocurrency punishing hyperinflation and the effects of U.S. sanctions that have stifled trade and rendered the Venezuelan currency nearly worthless. Since 2018 the government has experimented with different cryptocurrency projects, but so far none have succeeded. In 2018 the government released a national cryptocurrency, the petro, that President Maduro said would be backed by the nation's mineral wealth. But details about the offering---or even its level of adoption---have been slim. Local merchants reportedly won't accept it, and global analysts have called it a scam. Bitcoin seems to be doing much better as an alternative to the Venezuelan bolivar soberano, as everyday Venezuelans are increasingly using bitcoin for routine purchases. The government is now planning to adopt that strategy on a more global scale. Confusion in cryptocurrency taxation.
Few countries have embraced cryptocurrency in the manner Venezuela has. But many are eyeing the crypto industry through a much more traditional lens: as a stable growth industry. Taxation of cryptocurrency poses considerable confusion and uncertainty for global investors because taxing authorities are adopting different approaches. In many cases, regulators are folding cryptocurrency into existing tax rules and treating it as property subject to capital gains rates upon disposition. A minority of jurisdictions are treating cryptocurrency as a separate class of assets. Beyond that, updates on existing legislation and regulations have been slow. Confusion in cryptocurrency taxation.
There are no global standards for cryptocurrency taxation. Perhaps there should be. That's the take away from one of the latest review's of cryptocurrency taxation. A survey of tax rules in 30 jurisdictions that have released cryptocurrency tax guidelines, shows a jumbled landscape. The situation matters for cryptocurrency exchanges and investors moving forward because there a re several cryptocurrency areas, like decentralized finance and the VAT, GST, or sales tax treatment of staking income, that have little to no specific tax guidance, especially cross border.
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