Can Cryptocurrency Be Taxed?

Cryptocurrency is one of the latest investment trends happening in our society right now. For many people, it is seen as an innovative and transformative method of earning passive income. But how does it work? What makes it a better investment than savings, retirement, stocks, or real estate? And how is it taxed?

Cryptocurrency is a type of digital currency that uses coins and tokens and can be transferred and exchanged across the internet. It is run by blockchain technology which helps to keep it safe from trackers and being counterfeited. Crypto is also a decentralized monetary system, meaning it is not technically regulated or issued by any government agencies. It is freely connected in such a way that anyone anywhere can purchase or trade a token without any sort of bureaucratic entanglement. The fact that crypto is decentralized and unregulated is a massive factor in its selling point as it provides a lot of freedom for many people. However, part of the reason why crypto still maintains these benefits is that within the economic landscape many people still do not quite understand what it is and many governments do not know how to regulate it. As a result, there exists many forms of cryptocurrencies. The most popular cryptocurrencies are Bitcoin and Ethereum. There are other forms of crypto but they are not as successful nor as reliable as Bitcoin and Ethereum have proven to be. As such, crypto is a tricky market that can leave many skeptical, but it is still in its early phases meaning it is ripe with potential in setting up the future within the global economy.

So, why are people so excited by cryptocurrencies? Well, the short answer is that there is a lot of potential and money to be made with crypto. You can invest within a particular currency to help grow your equity through passive income. The investment is actually quite similar to that of stocks. You can choose whichever cryptocurrency you like the most and purchase a number of its coins or tokens at a set price and hold onto them until you wish to sell. The tokens you have is the only constant in your control. The way to make money with crypto is to sell it for higher than you purchased it, and you can do so through direct transactions. Unlike stocks, there is no stock market or any kind of government regulation that is keeping crypto in check. The limitations and boundaries are limitless, thus why so many seek it out. The only downside is that because crypto is such a new entity within our economy, it can be quite volatile such that making long-term investments in a cryptocurrency may not yield significant returns. The major reason for this is because there are so many different kinds of cryptocurrencies, many of which are unfortunately scams, that you may not be able to recognize which ones are legitimate and which ones are not. However, that does not excuse crypto from being a major part of our economic landscape as it is still quite relevant and a major asset for many businesses in how they make their profits.

So, what about crypto’s tax situation? Is it still taxable even though it is decentralized and not issued by the government? Well, yes it is still taxable, but the method to which it is taxed is actually very similar to that of other assets, such as stocks, gold, or holding properties. If you purchase any crypto tokens in a given year, you do not have to pay for any of them unless you sell them. It is only once the tokens are sold or transferred that you would have to pay taxes. The tax situation is actually quite similar to that of unrealized gains in stocks in that you can hold on to a large surplus of wealth and equity through ownership of the tokens, but until you sell them, they can not be taxed as you have technically not realized those investment gains. More specifically, the situations in which cryptocurrency can be taxed are as follows: when you trade in your crypto tokens for real, fiat money, a form of currency that is controlled, issued, or regulated by a government somewhere in the world (USD, Euro, etc.), when you trade one form of cryptocurrency for another (Bitcoin for Ethereum), when you use a cryptocurrency to purchase a good or a service, and when you buy, trade, or sell an NFT using cryptocurrency. The crypto situations in which you do not have to pay taxes are when you buy cryptocurrency with real, fiat money, donate cryptocurrency to a charitable organization (similar to tax-exempted real, fiat money donations), gift no more than $15,000 worth of cryptocurrency to another, transferring crypto from one account to another, both of which you own so the transfer is non-profitable, and buying an NFT with real, fiat money.

As mentioned, these taxable and non-taxable situations are very similar to other more commonly-known forms of investments. They are primarily focused on when the crypto makes real money and in what way it does so. The overarching idea is that crypto is taxed only when there are profitable gains for an individual that are not complete community improvements in the way that taxes are motivated and aimed to achieve. As such, cryptocurrency is a young, new, lucrative investment opportunity that anyone can partake in as its methodology is very similar to that of stocks and real estate. However, because it is still new, be careful about where you place your crypto bets as the market is still young and volatile that the trade has not officially been perfected yet.

So, what do you think? Do you think that crypto is here to stay? What are your thoughts about how crypto is taxed? Please comment down below and for more information, please visit BoldTV.