Government plans to execute regarding Crypto
CBW -External Analyst
Jan, 14 2021
Many nations are now actively considering what to try to about cryptocurrencies (CC's), as they do not want to miss out on tax income. To a point, they think they have to manage this market space for the sake of consumer protection. Knowing that there are scams and incidences of hacking and thievery, it's commendable that consumer protection is being thought of at these levels. The Securities Exchange Commission (SEC) came into being within the USA for just such a purpose. Therefore the SEC has already put some regulations in situ for CC Exchanges and transactions. Other nations have similar regulatory bodies, and most of them are working away at devising appropriate regulations. The "rules" will likely be dynamic for a couple of years, as governments discover what works well and what doesn't. Several CC's advantages are that any government or financial institution does NOT control them, so it might be a stimulating tug-of-war for several years to ascertain what governments will impose proportion regulation and control.
The bigger concern for many governments is that the potential for increasing revenue by taxing the profits being generated within the CC market space. The central question being addressed is whether or not to treat ccs as an investment or as a currency. Thus far, most governments lean towards treating CC's as an investment, like every other commodity where profits are taxed employing a Capital Gains model. Some governments view CC's only as a currency that fluctuates in daily relative value, and that they will use taxation rules almost like exchange investments and transactions. Interestingly, Germany has straddled the fence here, deciding that CC's used directly for purchasing goods or services aren't taxable. It seems a touch chaotic and unworkable if all our investment profits might be non-taxable if we used them to buy something directly - say a replacement car - every so often. Perhaps Germany will fine-tune its policy or re-think it as they are going along.
It is also harder for governments to enforce taxation rules as long as there are no consistent global laws requiring CC Exchanges to report CC transactions to the government. The worldwide and distributed nature of the CC marketplace makes it almost impossible for anybody to understand all the transactions of their citizens. Evasion already happens, as several countries provide global banking services often used as tax havens, sheltering funds from taxation. By their very nature, CC's were born into a realm of scant regulation and control by governments, which has both upsides and drawbacks. It'll take time for governments to figure through all this by trial and error - it's still all-new, and it's why we tout CC's and Blockchain technology as "game-changers".
CBW - External Analyst