By Sam Stein
Since they do not want to lose out on tax money and, to some extent, believe they must control this market area for the sake of consumer safety, several countries are currently actively debating what to do about crypto currencies (CCs). It is admirable that consumer safety is being considered at these levels given that there are frauds, instances of hacking, and theft. In the USA, the Securities Exchange Commission (SEC) was established specifically for this reason, and the SEC has already established some regulations for CC Exchanges and transactions. Similar regulatory agencies exist in other countries, and the majority of them are busy creating appropriate legislation. It is possible that the “rules” will change over the next several years as governments learn what works and what doesn't. One advantage of CCs is that no government or central bank controls them. As a result, it may be an interesting tug-of-war for many years to see how much regulation and control governments will impose.
The possibility of raising taxes on the earnings made in the CC market area is the main worry for most governments. Whether to use CCs as a currency or as an investment is the main issue at hand. The majority of governments currently favor considering certificates of deposit as an investment, just like any other good whose profits are subject to capital gains tax. Some countries simply see the relative worth of CCs as fluctuating on a daily basis, and so apply tax laws that are comparable to those that apply to investments and transactions involving foreign currency. It's fascinating how Germany erred on the side of caution by declaring that credit cards used directly to pay for products or services are not taxable. All of our investment gains becoming exempt from taxes if we occasionally used them to directly purchase anything, like a new automobile, sounds a little chaotic and impractical. Perhaps Germany will adjust its policy or reevaluate it as they proceed.
Given that there are no standard international laws mandating CC Exchanges to report CC transactions to government, it is also more challenging for governments to enact taxation regulations. It is virtually impossible for any one country to be aware of every transaction made by its residents due to the worldwide and scattered structure of the CC market. Tax evasion already occurs since a number of nations offer international banking services that are frequently utilized as tax havens to shield money from taxation. Due to their very nature, CCs are subject to little government regulation and oversight, which offers both benefits and drawbacks. Because everything is still new and will take time for governments to figure out through trial and error, we refer to CCs and Blockchain technology as “game changers.”