Crypto Taxes and Regulations

Learn everything you need to know about Crypto regulations around the world

Crypto tax is the fee paid to financial regulators from earnings in cryptocurrency. It is also worthy to note that regulators take the issue of crypto taxation seriously. Defaulters face huge penalties should any case of a default in payment arise. Crypto regulations are laws enacted by financial regulators whose purpose is to guide cryptocurrency activities. The regulations direct both traders and firms on carrying out their activities. These laws, if abided by, will ensure that Crypto investors, traders, and service firms, will never fall into the black books of the law.

A Look Into Crypto Tax

Regulators have classified digital assets differently across countries where crypto trading is high. The U.S IRS sees cryptocurrencies as capital assets. This means that profits realized from selling them are taxable. Taxes are levied depending on how long you have held onto the assets. For example, crypto traders will pay short-term capital gains on digital assets held for less than a year. Alternatively, they will pay long-term capital gain taxes on profits realized from sales of their holdings if purchased for more than a year.

According to the IRS, if you use your cryptocurrency to buy goods and services, it will be classified as a sale of the asset. This means that you will owe capital gains taxes, depending on your profits and how long you have held on to the digital asset. Cryptocurrencies earned from mining received as payment for goods and services are taxable. According to the IRS, crypto investors and traders must pay tax on crypto earned. This is because they view them as regular taxable income.

A Look Into Crypto Regulation

Many crypto enthusiasts have called on regulators globally towards proper regulation of the crypto space. This is because analysts believe that the adoption of crypto will grow with appropriate laws. Another reason is that countries should focus more on regulations instead of banning crypto trading activities. With this, the government will be making huge returns from crypto tax. Unfortunately, crypto trading is prohibited in some parts of Africa and Asia.

Analysts believe that these nations have no policies to guide crypto trading activities in their space. A typical example of such a nation is Nigeria- a country that prides itself as the economic hub and the giant of Africa. It is currently illegal to trade cryptocurrency in the country. The nation, via its central bank, announced that trading cryptocurrency was illegal earlier in the year. It also said that citizens dealing with digital assets would face prosecution.

Its Apex financial body has since instructed commercial banks to block accounts of citizens affiliated with cryptocurrency. While it is pretty unfortunate, analysts believe that nations take crypto regulations seriously instead of banning them. In their opinion, cryptocurrency has come to stay.

What are some Essential Regulations for Crypto in 2021?

With crypto trading becoming prominent, countries have taken different approaches to regulate the assets. In the U.S, cryptocurrencies are Securities. The Securities and Exchange Commission (SEC) regulates Crypto Exchange under the Bank Secrecy Act (BSA). Traders must comply with AML/CFT obligations and register under the Financial Crimes Enforcement Network (FinCEN). Canada is also another nation where crypto trading activities are legal.

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) regulates the assets. 2021 was an important year for the country’s crypto community. This was because of the license of its Bitcoin exchange-traded fund and Ethereum exchange-traded fund. The North-American government classifies crypto exchanges as Money Service Business (MSB), complying with AML/CFT regulations. To kickstart their operations in Canada, the exchanges must earn a license from FINTRAC. The United Kingdom has similar regulations with the U.S and Canada. However, it currently prohibits exchanges licensed by the Financial Conduct Authority (FCA) from offering Crypto derivatives trading.

Crypto Friendly Countries in the World

It is no longer news that traders see cryptos as game-changers in the finance scene. This is because crypto provides investors with the freedom that is absent in the traditional banking system. Digital assets have so much promise. Despite that, it still falls under two categories of ratings. The first is people who see the assets’ positive aspect, while the second sees the negative aspect. While we have that in terms of people, so do we have it in terms of countries. While some countries have adopted the assets, others are still hostile towards it. In this article, we will be taking an inside look into some crypto-friendly countries across the world.

Two factors are taken into consideration to measure how friendly a country is regarding digital assets. The first factor is how lenient the government is on traders in terms of tax, while the second is crypto regulation. Even though some countries are very rigid regarding the two factors above, below are some crypto-friendly countries.

When it comes to crypto investments in Portugal, regulators are not as stringent as on other investments. The law regarding crypto in the country is said to be one of the most friendly worldwide. For instance, tax authorities do not levy capital gains tax on traders of crypto across the country. In addition, exchanging of one crypto to another is subject to free taxation.

Individuals who get their payments are also not levied with income tax. But companies that deal in crypto would be subject to pay the usual capital gains tax. Portugal is a very good destination for crypto traders due to its advantages in terms of tax payments. Asides from that, Portugal also has a few programs that would ease crypto investors into the country.

Switzerland is notable for its high rate of privacy and low-risk rate in its banking sector. It should also not come as a surprise that the country is one of the few crypto-friendlies. However, the region system that is being run in Switzerland determines the regulation of a particular sector. This is because the 26 regions across the country have their different view of digital assets.

A region might decide that it wants Bitcoin traders to pay tax, while another might make it tax-free. Zurich is a case study as the region does not levy tax on movable private wealth. This means that assets like Bitcoin and other digital assets are not taxed. However, miners have to pay income tax on the gains from their business. Notably, it is this way across the majority of the regions in the country, with only a select few being stringent on crypto.

Germany has refused to recognize Bitcoin as a legal tender across the money as it sees it as private money. Most of the laws that crypto abides by a tilt towards the side of traders who hold for a long time. Germany exempts citizens who hold any digital asset for a year and more from paying tax.

This exemption does not have a limit as traders can hold any amount that they want. Investors who hold their assets within a year would be subject to pay capital gains tax if they hold assets worth more than $712. Just like most crypto-friendly countries, investments holding crypto will pay capital gains tax. In a nutshell, long-term investors are the major winners of trading crypto in Germany.

One of the most stable countries globally, Singapore provides businesses with the best place to grow. Singapore is also said to have one of the biggest FinTech across Asia. The Monetary Authority of Singapore says it wants to watch digital assets and encourage their growth. This has made many analysts regard the country as one the most balanced in regulating crypto.

Singapore does not levy capital gains tax on both individuals or businesses holding assets in terms of tax. Meanwhile, companies actively using crypto either for payments or trading will be subject to income tax. Authorities also regard Bitcoin as an intangible property instead of a legal tender. They regard the payment for goods with crypto trade by barter. Taxes are paid for services enjoyed and the goods bought but not crypto paid.

Malta has easily cemented its place as the go-to area for crypto investors if they decide to set up a business. Due to its crypto-friendly stance, many crypto exchanges and blockchain companies have their branch in the country. A notable resident is Binance, who entered the country on the back of stringent regulations in Hong Kong. One reason why investors turn to Malta is that it is in the European Union.

This means that crypto ventures in the country will be able to operate across Europe for free. Malta also recognizes Bitcoin as a store of value and a medium of exchange. For long-term holders of Bitcoin, there is no levy of capital gains tax. But traders are subject to pay a 35% income tax because trading crypto is the same as trading shares.

According to the Digital Asset Business Act released in 2018 in the country, Bermuda regulates crypto dealings. Trading and selling, providing payment via crypto, and a few others are not taxed. This is why the country is one of the most crypto-friendly nations. It also attracts a huge pool of traders and businesses into the country. A really good example is the Exchange Traded Funds aspects of the market. After frustrations with attempts to launch several ETFs in the U.S in 2020, Bermuda approved its first in the country. The launch of the Hashdex Nasdaq Crypto ETF shows that Bermuda is up there with other crypto-friendly countries.

Other worthy mentions are Slovenia, where traders pay capital gains tax on the sale of Bitcoin. However, countries that take payment in crypto are subject to corporate tax. Malaysia is another country that does not levy any tax on crypto holdings. Also, the country does not see crypto as legal tenders, so traders do not pay the capital gains tax. In the same vein, the country recognizes profits made from trading crypto, and holders are mandated to pay tax. El Salvador is the latest country to join this list as they regard cryptos as legal tender. Foreign investors who trade crypto in the country will not pay tax on their gains. This was regarded as a tactical move to lure investors into the country, which will help its economy in the long run.

Tax and Accounting Software

We all need to declare taxes and follow our accountability, use software to make it easier on yourself!

We recommend you check our #REGULATIONS section before looking at this page as we are presenting the best software to check your accounting liabiities for tax purposes. We all need to declare taxes over our income and doing so with crypto can be hard. This is why we’ve selected these picks for you!

Koinly

CoinTracker

Want to learn more about stablecoin strategies?

We have picked out the best articles for you!

Check out our articles…

Make the most out of stablecoin farming yields!
MIM-UST degenbox strategy for stablefarm degens
Stablecoin Defi strategies in the FTM network
Using Auto-compounders like YFI to increase your stablecoin defi APY
Stablecoin dual farming on the CRV liquidity pools
Orion Protocol – 20% yield on all your stables

Or join our Premium Discord Server to be up to date on the latest NFT news!

Crypto Taxes and Regulations

A Look Into Crypto Tax

A Look Into Crypto Regulation

What are some Essential Regulations for Crypto in 2021?

Crypto Friendly Countries in the World

Portugal

Switzerland

Germany

Singapure

Malta

Bermuda

Others

Tax and Accounting Software

Koinly

CoinTracker

Want to learn more about stablecoin strategies?

blockpit

Recommended posts

Cryptoticker

Follow us