Part 1 of this series discussed the basics of cryptocurrencies and the challenges tax authorities face as they attempt to construct a tax and regulatory framework for them. Part 2 will consider how some of the world’s major economies are meeting this challenge.
Countries’ Stance on Crypto
As the transformation of cryptocurrencies from speculative investment to stablemate in a balanced portfolio continues to gather pace, governments around the world remain divided on how best to regulate them. The table below provides a brief overview of the cryptocurrency landscape across some of the major economies.
Please note that the tax implications mentioned above are from an investor perspective and do not cover the scenario of businesses/individuals engaged in crypto trading/exchange/mining.
U.S.
Although it is difficult to find a consistent legal approach at the state level, the U.S. continues to make progress in developing federal-level cryptocurrency legislation.
The Securities and Exchange Commission (SEC) typically views cryptocurrency as a security and applies securities laws to digital wallets comprehensively in an approach that affects both exchanges and investors. The Commodity Futures Trading Commission (CFTC) recognizes Bitcoin and Ethereum as commodities and allows other virtual and cryptocurrency derivatives to trade publicly on exchanges that it regulates or supervises. The U.S. Treasury calls cryptocurrency a currency, and the Internal Revenue Service (IRS) treats it as digital property.
Crypto exchanges in the U.S. fall under the regulatory scope of the Bank Secrecy Act 1970 (BSA) and must register with the Financial Crimes Enforcement Network (FinCEN). Along with BSA regulations, they are also required to comply with anti-money laundering (AML) and combating the financing of terrorism (CFT) obligations. Accordingly, cryptocurrency exchange service providers must obtain the requisite license from FinCEN, implement an AML/CFT and sanctions program, maintain…
