Law Decoded: Crypto taxes and taxes on crypto, March 21–28.

Law Decoded: Crypto taxes and taxes on crypto, March 21–28.

Last week was quiet at the department of digital asset policy. Most key jurisdictional regulators and legislators went back to their offices to complete the required research. The U.S. federal agencies continued to produce the reports President Joe Biden had ordered them to. The position papers regarding crypto-related issues were also dropped by the Financial Conduct Authority and the central bank of the United Kingdom. After much deliberation, Thailand’s financial authorities reaffirmed their opposition to crypto as a payment method. However, rumors about legal tender adoption of crypto were rumored and later died in Honduras.

The relationship between taxation and digital assets has been a prominent theme throughout the week. Many would agree that offering Bitcoin tax payment options to citizens of cities and states is a way for the Lord to help crypto adoption. However, taxation of digital assets is not necessary to legitimize crypto. Contrary to what some might think, India’s approach showed that it was possible to levy high taxes on cryptocurrency transactions and maintain ambiguity about the asset class’s legal status.

Life in Crypto City

While the U.S. Congress and other executive agencies are taking their time to develop comprehensive crypto policies, the U.S. city councils and others are filling in the gap. Austin, Texas’ capital, took a strong stance on crypto when it passed two resolutions to promote blockchain-powered innovation. According to the rumours, the city could soon receive its CityCoin and join New York and Miami. New Hampshire’s mayor, Portsmouth, is pushing to allow residents to pay municipal services in Bitcoin or other cryptocurrencies. Rio de Janeiro, Brazil is set to accept BTC payments to pay real estate taxes in 2023. This is a short time frame for a city with nearly 7 million inhabitants.

Taxes vs. digital assets

India is moving quickly to introduce new taxation rules for cryptocurrency transactions. The crypto community in India will be subject to a 30% tax burden beginning April 1, despite some opposition from the industry. They cited a variety of reasons why imposing harsh crypto taxes could be a poor policy choice. The framework was introduced by Nirmala Sitharaman (Finance Minister). She previously stated that taxing something doesn’t mean it has legal status. One of the largest crypto markets in the world is now getting rules that treat digital assets like lottery winnings and gambling profits. Details on the enforcement of decentralized finance activity laws are still scarce.

Not today, partisan politics

It is important to prevent crypto becoming a problem with deeply entrenched divisions along party lines in the United States’ polarized politics. The process has been quite successful so far with crypto allies on both the Republican side and the Democratic side of the aisle. A surprising alliance was formed between Cynthia Lummis, a Republican, and Kirsten Gillibrand (her Democratic peer). The two announced a joint effort in creating a comprehensive bill to categorize digital assets, and define the boundaries of regulatory agencies’ mandates.

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