What are crypto or crypto assets:
Crypto assets are assets that people can transact online, & that are secured by cryptography & stored on a decentralized ledger called the blockchain. Assets such as stocks, bonds, etc., which governments regulate, are easy to comprehend. However, governments or any financial institutions do not regulate crypto assets; their value is determined solely by supply & demand in the free market. Some e.g. Read more of crypto assets are Bitcoin, Ethereum, &Litecoin.
These days, people worldwide have become very much interested in crypto as technology & as an investment alternative; underlying blockchain technology ensures secure, decentralized transactions without the need for any institution or govt, which makes it even more interesting & valuable.
Investing in crypto assets:
The investor’s community keeps looking to diversify their portfolios to reduce exposure to non-performance assets/instruments, with Bitcoin Smart, which do not involve any legal authority. It is becoming a great alternative asset from an investment point of view. One of the reasons for such interest is cryptocurrencies are not subject to traditional financial markets. They have a history of performing well during unfavorable economic scenarios, & hence provide a good hedge option to many.
Returns:
One thing to consider with crypto is that; it’s been a very volatile commodity until now; historical data suggest its performance to be constantly volatile. With value, keep moving up & down significantly in a day. E.g., early investors of Bitcoin have seen its value increase impacting their portfolio with a green over a decade. Still, recently due to its manipulative nature from outside sources like celebrity endorsement and financial influencer involvement, its returns are seeing volatility not associated with traditional assets like shares, gold, property, etc.
Growing need to tax crypto assets:
Given the crypto rise & investors’ interest from all over the world, many governments of various counties have expressed concern about the potential risks & dangers of its unregulated nature, even though some countries are already accepting this new currency with some checks.
While many countries have already begun to tax cryptocurrencies like Bitcoin, Ethereum, Dogecoin, etc., some counties are still working on their taxation element. Right now, the taxes are meant to ensure investors pay their fair share of taxes to the nation & to prevent any illegal transactions over the Internet.
Challenges of crypto tax:
Due to its very nature of decentralization of authority, it is harder to control such assets, but some countries have already worked out a solution. E.g., in the US, the Internal Revenue Service (IRS) considers crypto assets as property & levies taxes accordingly. Like traditional asset, it ensures any crypto transaction by an individual involves capital gain taxes on profits.
Countries like Japan &Australia are taking a more specific approach to crypto transactions. In Japan, for example, cryptocurrency ownership is termed “miscellaneous income” & requires holders to pay tax on income earned from trading or mining cryptocurrency.
Countries worldwide are paying close attention to new rage, i.e., digital crypto assets & building environments for such transactions to get considered as any other regular financial asset.
UK government tax reforms on crypto assets:
In 2019, to combat the unregulated nature of crypto assets, it came up with ‘HM Revenue and Customs’ (HMRC), which published a comprehensive guide on the tax treatment of crypto assets. This guidance clarified that individuals and businesses must pay taxes on their crypto gains and losses and that crypto assets are subject to the same tax laws as other forms of property.
Furthermore, in 2020, the UK government proposed new legislation requiring crypto exchanges and custodian wallet providers to collect and share customer information with HMRC. This move aims to improve crypto sector tax compliance and prevent tax evasion.
Additionally, the UK’s Financial Conduct Authority (FCA) has introduced regulations that require crypto businesses operating in the country to register with the FCA and comply with anti-money laundering (AML) and counter-terrorist financing (CTF) requirements.
Conclusion:
This proactive step by the UK government to regulate the crypto industry & fair levying of taxes on crypto asset holders must be noted by other countries all over the world. The government’s comprehensive guidance on the tax treatment of crypto assets and proposed legislation requiring crypto exchanges and custodian wallet providers to share customer information with HMRC demonstrate its commitment to improving tax compliance and preventing tax evasion in the sector. With these measures in place, the UK is well-positioned to create a stable and secure environment for crypto investors and promote the growth of the crypto industry in the country.
