Crypto-taxing has been talked about a lot lately. While South Korea’s regulators recently stated that taxes cannot be imposed on crypto-profits, Spain’s tax agency, the Agencia Estatal de Administración Tributaria (AEAT), just a week ago announced the delivery of notices to around 66,000 digital currency investors.
It has been established by now that the IRS does not see cryptocurrencies as currencies, but instead as assets/property. This means that every cryptocurrency transaction, including crypto-to-crypto, creates a taxable event that is subject to tax. However, there is still a lot of confusion regarding these crypto-tax laws.
Leading crypto companies like Coinbase, Ripple, Kraken, Chainalysis, and Coinsource all demanded more clarity from the IRS on crypto-tax issues at a recent summit organized by the IRS. Crypto-analyst and lawyer Jake Chervinsky in a recent podcast shared his thoughts on the country’s current crypto-tax laws and opined that laws, at the moment, are not very appropriate for crypto-technology. He said,
“There are lawyers who specialize in very narrow areas of laws applying to the finance industry but it’s really hard to say in general how all of these different frameworks are applying to crypto broadly. But we’re starting to get some clarity around the tax laws, which are definitely very important.”
The difference between the laws around DeFi and Bitcoin specifically is another interesting topic. While the laws around Bitcoin are generally classified as more mature, solidified, and stable, the laws around decentralized finance do not have a clear-cut definition, given the vast sector DeFi alludes to. Commenting on this difference, Chervinsky added,
“Bitcoin law is a subset of DeFi. The legal issues that people who are only working on Bitcoin have to deal with are not all the same as someone who’s working in the DeFI space, with other crypto projects. However, I do think that ultimately adoption is what we’re moving toward. The main question to be addressed is whether ordinary people will be comfortable use this technology.”
As Chervinsky noted, the bottom line is this – “Are common people comfortable getting into the crypto-space with current tax laws, be it just Bitcoin or DeFi as a whole?” However, looking at the present state the crypto-community is in, it is going to take some time for crypto-exchanges to find answers to the question of how they can comply with a number of different crypto-tax laws in the pipeline and serve the community better.
