2021 was a game-changer for the crypto market. Bitcoin hit its new all-time high several times last year, albeit with a few big drops. The second biggest crypto, Ethereum, had its fair share as well, as it has hit its highest price recently.
It looks like many people have started to understand how crypto works. Their interests have grown over the last few years since crypto’s inception in the financial market. In fact, some financial experts see cryptocurrency as the future of money.
But as cryptocurrency has taken the plunge, the financial industry should be wary of its use in a decentralized market. Governments should also impose realistic regulations to safeguard investors and prevent cyberattacks on digital assets.
One of the biggest questions is: how does crypto get taxed?
This article covers the correlation between cryptocurrency and taxation in some countries. Read more to learn how crypto gets taxed around the world.
For the uninitiated, a cryptocurrency is a form of digital or virtual currency. It serves as an alternative form of payment using encryption algorithms in blockchain technology (a distributed ledger in a network of computers).
In other words, you can conduct financial transactions online without using conventional currencies like dollars or euros. As a decentralized system, crypto exists without the control of central authorities and governments. As an encryption structure, it doesn’t only serve as a virtual currency but also as a digital accounting system. Some of the crypto’s advantages include cheaper transactions and faster fund transfers. On the other hand, it is subject to volatile pricing and potential exposure to cyberattacks.
The founder and CEO of WallStreetZen, Nate Tsang, believes investors must set their eyes on cryptocurrency.
“While building their investment portfolio, they must start to look at other alternatives. They should begin to learn and understand how crypto works,” Tsang said. “As we’re heading towards virtual currency, it pays to start investing in crypto early on.”
Bitcoin was the first cryptocurrency introduced in 2009. While it is still the most widely used, other forms have grown in the market, such as Ethereum LiteCoin, and Ripple.
We know that tax is part and parcel of life. Almost everything is taxable in this world. While cryptocurrency is relatively new as a market, it must be subject to tax.
Crypto can be mined or purchased in cryptocurrency exchanges. You can also sell it to another person or investor. Some people use crypto to buy goods or items in online retail stores. It is, for these reasons, crypto needs to get taxed.
Know, however, that cryptocurrency is looked at differently by various countries. In fact, it’s legal in most countries, while it may be illegal in some. Also, some countries tax crypto while others do not. Here’s what you need to know:
Furthermore, some countries don’t tax cryptocurrency. Below are some of them:
Some countries consider cryptocurrency illegal. Their citizens cannot hold crypto and conduct crypto transactions within their jurisdictions. Take note of the following:
It’s worth mentioning that El Salvador was the first to recognize crypto, such as Bitcoin, as legal tender. The Central African Republic has also declared bitcoin as legal currency just recently.
In addition, CoinMarketCap has enlisted countries that have passed legislation on allowing crypto as legal tender. In fact, Shaun Heng, CoinMarketCap’s VP of Growth and Operations, said Paraguay, Venezuela, Anguilla, the United States, and Panama might follow suit.
“It looks like countries and people are becoming more and more open to accepting and using digital currencies. Crypto looks bright and promising. It’s safe to say that it is the future of money,” Heng said.
It’s evident that the use of blockchain technology is the future. On a specific note, there’s no denying the recognition and acceptance of cryptocurrency worldwide.
It’s now imperative to learn how crypto works and understand its financial implications on the global market. Most importantly, understand its impact on you as an investor.
On top of these, you must learn how crypto gets taxed in your jurisdiction or country. Consider the valuable information discussed above. With all these in mind, you know what to expect in your crypto investment as far as taxation is concerned.
In the end, cryptocurrency should boost your financial assets — not lead you to financial losses!
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