Many countries are now actively thinking about what to do about crypto currencies (CC’s), because they don’t want to get away with tax revenue, and to some degree they think they need to control this market gap. for consumer protection. Knowing that there are scams and incidents of hacking and theft, it is commendable that consumer protection is considered at these levels. The Securities Exchange Commission (SEC) has become one in the USA for the same purpose and the SEC has already put in place some regulations for the CC Exchange and transactions. Other countries have similar governing bodies and most of them are working to draft appropriate regulations, and it is likely that the “rules” will become dynamic in a few years, as the government discovers what works well and what is not. Some of the benefits of CCs are that they are NOT controlled by any government or Central Bank, so it can be an interesting tug-of-war over many years to see how much regulation and restraint governments will impose. .
Of greater concern for most governments is the potential for revenue generation by taxing revenues generated in the CC market space. The main question addressed is to treat CC’s as an investment or as a currency. Most governments to date have relied on the treatment of CC as an investment, as with every other commodity where revenue is taxed using the Capital Gains model. Some governments only view CC’s as a currency that changes at a daily exchange rate, and they apply tax rules similarly to foreign investment and transactions. It is interesting that Germany has opened the fence here, choosing to directly use CC for the purchase of non -tax products or services. It’s like a bit of a mess and won’t work if all the income we invest can be tax -free if we use it to directly buy anything – say a new car – all the time. Maybe Germany will improve their policy or rethink it.
It is also more difficult for governments to enforce tax rules given that there are no similar laws in the world that require the CC Exchange to report CC transactions to the government. The global and distributed nature of the CC market makes it almost impossible for any one country to know about all the transactions of their citizens. Tax evasion is already happening, as there are many countries that provide global banking services that are often used as tax shadows, sheltering funds from taxes. In nature CC’s were born in an area of little regulation and restraint by governments, and that had both ups and downs. It will take time for governments to do everything by trial and error-it’s all new and because of this we’re giving CC and Blockchain technology as “game innovators”.
Keep on going