The cryptocurrency space has been on the gray side of the financial space since its conception. But with bitcoin and the traditional financial and crypto sectors in general they get more relatedThe government now seems to have found a way for cryptocurrency to be taxed.
The past year has been difficult for cryptocurrency. The collapse of the big industry players like Capital of the Three Arrows, Celsiusand just recently FTX has a strong influence on how governments are now paying more attention to the crypto industry.
Bitcoin: Clear And Necessary Regulation
Although cryptocurrencies are already taxed through capital gains tax, there are no specific regulations that directly apply to cryptocurrencies, only profits made in trade. In the first half of 2022, the Ministry of Finance released “Green Paper” or tax policy proposal.
One part of the proposal is entirely dedicated to bitcoin and cryptocurrency brokers and how digital assets should be taxed. In summary, the Treasury proposal would:
“Requires certain financial institutions to report account balances (including, in the case of cash value insurance contracts or annuity contracts, cash value or surrender value) for all financial accounts maintained in US offices and held by foreigners.”
Image: The Military Wallet
This is due to FATCA or the Foreign Account Tax Compliance Act which basically monitors possible illegal financial movements by legal US entities. The proposal, if passed into law, would not only give the US access to information about assets held by Americans, but also allow the country to share financial information about non-American accounts with partner jurisdictions.
However, there is no evidence that the proposal has changed or not since Kas silent since.
How Will A Superpower State Work?
Cryptocurrency regulation is not new. Just this week, Italy passed laws that require traders to pay capital gains tax as in the United States. Regulation in emerging markets has become much stronger, which leaves the question of whether Uncle Sam will do it.
With wounds still healing from last year’s devastating bear market, the US Federal Reserve may hold off on major announcements. This is probably due to the fear, uncertainty and doubt (FUD) prevailing in the current cryptocurrency market.
BTC total market cap at $331 billion on the weekend chart | Chart: TradingView.com
The announcement that bitcoin will be immediately taxed today could put downward pressure on the crypto market. Having said that, the regulations are like that strike against the core principle of crypto which is decentralization.
But if the US government can make the policy clear, it could spark new interest in bitcoin and the cryptocurrency industry as a whole and help it grow.
However, it remains to be seen what the politicians will do to make the country competitive in the crypto market.
As of writing, Bitcoin is trading at $17,211, up 3.6% in the last seven days, data from Coingecko shows.
-Featured image: BioEnergy Consult