FinancialCentre Broker Details Crypto Tax Proposal: What Is And How Does It Affect Bitcoin?

London, UK, 7th August 2021, ZEXPRWIRE – The US Senate and House of Representatives have passed a bill that would require crypto traders to pay taxes on their transactions. This is the first time that any major country has taken steps to regulate cryptocurrencies, including bitcoin.

The bill defines digital tokens as property, which puts them under the category of assets and goods.

This tax law affects everyone in the US who buys and sells cryptocurrencies such as bitcoin. This means that if you have had transactions with Bitcoin in 2017 or earlier, you will be expected to declare it on your income tax.

Failure to do this can lead to penalties. FinancialCentre broker, Michael Cohen, details that more than 900 virtual currency platforms have been registered with the tax agency, but experts say that an estimated 100,000 Americans and state residents owe taxes on their cryptocurrency profits every year.

This new legislation in the US is a global first; no other country has taken this step. Some countries will notice these developments and follow suit, while others will continue to step back from the idea of regulating bitcoin as a form of payment.

The pros and cons of this law are clearer when you consider how it affects individuals, investors, companies, and the government itself. Let us look at each category in detail now:

Individuals: For an average investor or trader, this will not have much of an impact. Anyone who makes a profit from trading or investing in bitcoin will be required to report it as “other income” on the 1040 tax form, which US citizens and residents use for individual income taxes.

This new tax law should not discourage investors from buying cryptocurrencies if they feel that doing so would help them make more money in the future. Some people might be afraid to invest in bitcoin or other cryptocurrencies due to this tax law. Still, they remained confident last year when rumors about a major crackdown started spreading around the world’s financial markets. Cryptocurrencies are not going away any time soon; instead, there will be an increasing number of people joining them every day.

That’s because blockchain technology will transform the way we handle money, and this will have a very positive impact on people from all walks of life.

The only people who may feel discouraged by the tax law are those who buy bitcoin for speculative purposes or gamble with it. Some of them might think twice about doing that now due to new regulations targeting this kind of behavior.

Investors: Most serious investors are not afraid of anything when generating income from bitcoin and other cryptocurrencies. The main issue here is that this new tax law will increase costs for companies who want to launch an ICO using the Ethereum platform.

For those planning on investing in ICOs, this could push them further away from the market due to the higher costs of launching an ICO, which could negatively affect cryptocurrency prices.

In most cases, investors buy tokens during a presale or crowd sale, and they only become liquid after a certain period of time (anywhere between 3 months and 5 years). This means that companies will need to deposit cryptocurrencies into their accounts so they can pay their taxes.

This would increase the cost of launching an ICO, which could lead to less competition in the market. A limited number of credible ICOs entering the market could affect prices.

All in all, several factors will need to be taken into consideration here. Also, some companies may choose to relocate their coin offerings outside of the US to countries where cryptocurrencies are not being regulated (the Cayman Islands or Switzerland, for instance).

Capital Gains Tax: There is currently a debate about whether or not the crypto tax proposal will help the United States Treasury reduce capital gains taxes. This is because every income tax has some connection to capital gains since wages are converted into cash which can then be used to buy assets that can potentially increase in price and convert back into a larger number of dollars later.

The only issue here is that people might start avoiding investing in assets that generate income. That’s because this new crypto tax law will make it harder for people who have converted their cryptocurrencies back into dollars and other fiat currencies to avoid paying capital gains taxes on them.

This would not impact investors simply buying tokens and holding onto them for as long as possible. Still, it could negatively impact companies who convert their cryptocurrency reserves into fiat currency after raising enough money in an ICO.

As we can see, several factors are at play here, which means that the crypto tax proposal could have a huge impact on the future of bitcoin and other cryptocurrencies.

The US Treasury will certainly profit from this new tax law, but the question is will it have a positive or negative effect on cryptocurrencies and blockchain technology?

This new tax law certainly hits home, but what’s important to note is that people would have been affected by this even if they didn’t invest in cryptocurrency. That’s because every income tax has some connection to capital gains taxes since wages are converted into cash which can then be used to buy assets that potentially increase in price and convert back into a larger number of dollars at a later date.

Disclaimer: Our content is intended to be used for informational purposes only. It is very important to do your own research before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with, or independently research and verify, any information that you find on this article and wish to rely upon, whether for the purpose of making an investment decision or otherwise.