What to Expect in Crypto Taxation for 2020

The Nature of Cryptocurrency Taxation

  1. identifying the tax base and taxpayers in terms of transaction anonymity
  2. taxation of income received as a result of mining virtual currency, and confirmation of transactions within the system.
Source: Deloitte

Novel Tool for Investments

  • Manufacturability and ease of management
  • Democratic entry into the market (valuable for beginners and those without large financial resources)
  • The presence of various income-generating strategies
  • The ability to create completely passive income
  • Lack of reference to any specific territory

Conceptual Approaches to Crypto Taxation

  • Issuing and receiving cryptocurrency can be recognized as receiving taxable income, which is taken into account at fair market value regardless of sales (U.S., Spain, Japan, Israel) followed by taxation of capital gains
  • Establishment of a tax-free minimum for activities “for personal use” (Sweden, France, Australia)
  • Recognition of the taxable object of capital gains only when exchanging cryptocurrency for fiat money and establishing benefits in case of long-term investment or small transaction volume (Germany, Singapore, Brazil). It is important to note that financial authorities have not formed a cohesive approach to taxation of cryptocurrency in countries where mining is most profitable, according to Bloomberg. This takes into account factors like the cost of electricity, ease of doing business, availability of renewable resources, average Internet speed, and the average annual temperature (Canada, China, Switzerland, Russia).

What Awaits Us in 2020?

BitFunder Wallet Trap

Arise Bank Case

  • The project’s acquisition of a “bank with a 100-year history” in support of the fact that investor accounts would now be insured under the federal deposit insurance program. In fact, the Federal Deposit Insurance Commission had no information on bank participation in this program.
  • An agreement with the VISA payment system confirming that customers would receive bank cards for this payment system (there has been no such agreement as of yet.)
  • A lack of information about their criminal past in biographies of project organizers posted on the website and in the white paper. In addition, AriseBank was not authorized to conduct banking operations in Texas and was not insured by the FDIC. An important point is how AriseBank tried to defend itself against SEC claims. The company referred to the fact that it created an autonomously-functioning network of private investors, and did not raise funds from a wide audience. This thesis did not receive a rebuttal, but also did not affect the actions of the SEC. Now, two executives of the scam ICO must pay a $2.7 million penalty.
  1. Further definition and categorization of cryptocurrency. The Cryptocurrency Act of 2020 defines cryptocurrencies, crypto commodities, and crypto securities.
  2. Clarifying which agencies are responsible for the regulation of each category, including licensing, certification, and registration required for issuing or trading or digital assets across markets. According to the Cryptocurrency Act of 2020, the Financial Crimes Enforcement Network (FinCEN) will control cryptocurrency, while the SEC will control crypto-securities. The Commodity Futures Trading Commission (CFTC) will deal with crypto-commodities.

Summary

  1. The U.S. government will continue its efforts to enforce crypto taxation, so if you haven’t filed your crypto taxes yet, do so by April 15.
  2. Further clarification and refinement of the rules, including new tax exemptions, will create more savings opportunities for crypto investors. However, this makes the process of crypto tax calculation more complicated: it will have to be automated to provide ease of use and reliability.

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Simplifying DeFi and cryptocurrency taxes for investors & tax professionals. www.zenledger.io