Cryptocurrency and Tax

Cryptocurrency and Tax


As long as there was trade, there was always currency. Initially, these currencies consisted of coins or tokens with real value. Often, these tokens were made of gold or silver.

However, as time passed, governments realized that if these coins were replaced with non-valuable symbolic tokens, real gold could be taken under control by these governments. It is possible that they produce tokens with a much greater value than the gold reserves they actually hold.

This is a license for printing money, and since this concept was introduced, the license in question has benefited greatly.

Ultimately, the world's governments need to control the currency to protect their own interests.

Then the cryptocurrency appeared, and the symbolic nature of the currency rose to a whole new level. In the current situation, there is no physical material to represent the claimed value, and governments are very concerned that they cannot retain any authority or control over the creation or use of this currency.

This will not be allowed to continue because it has clearly threatened the tax base on which governments rely on their funds and is challenging their power as a "controller" of a nation's wealth.

This would not be allowed to continue as governments openly threaten the tax base they rely on for their own funds and challenge their power as a "controller" of a nation's wealth.

While cryptocurrency has been" something " for a while, but now its value and the threat it represents are beginning to be recognized by the authorities.

Here in New Zealand, the IRD has begun investigating those who hold cryptocurrencies, and the IRS in the US is also trying to involve such people in their networks.

The IRD uses the power granted to them by the government to demand that cryptocurrency-dealing companies hand over details of their customers.

"The IRD wants this information to improve our understanding of the crypto asset environment in New Zealand so that we can figure out how best to help taxpayers meet their income tax obligations."

I found it extremely interesting that the IRD examined this from a tax compliance perspective when cryptocurrency is considered property, not currency. Since there is no capital gains tax in NZ, how does owning cryptocurrency affect income tax liabilities (more than owning a car or a home)?

Is this data compiled to change the tax status of crypto?

In the United States, the IRS approaches crypto from the same perspective. He sees it as an asset rather than a currency. Therefore, when it is sold at a price greater than the purchased price, an earnings tax is paid even if the held value increases.

The IRS's treatment of crypto as an asset is seen as a disadvantage due to a sudden drop in the value of the coin they own, such as the fact that anyone who has suffered a loss can effectively claim a loss of capital and balance it against other tax obligations.

Here in New Zealand, the non-cryptocurrency situation means that the IRD cannot tax an unrealized increase in value, such as interest paid on bank deposits or increases in wealth caused by fluctuations in exchange rates.

It should be said that cryptocurrency poses a challenge for the tax authorities. However, efforts are being made to find a way to maximize the benefit of the state's wallet.