Here’s Why It Is Illogical to Tax Cryptocurrencies

The rapid emergence and growth of digital assets have created a market cap of around $3 trillion in less than 13 years. One of the main factors contributing to their rapid emergence and growth is their ability to sidestep the traditional financial systems. This decentralization has allowed digital assets to reduce the cost of transactions and accelerate their transaction speeds. It also creates a parallel investment system that will enable investors and entrepreneurs to take advantage of the available opportunities in the market. Due to the complexity of the digital asset market, tax authorities are not able to come up with a common strategy to address the various tax issues related to its growth. The varying tax implications of ownership, purchase, and sale have created an environment of uncertainty for both individuals and corporate tax teams. However, some reasons highlight why it is illogical to tax cryptocurrencies. Let’s dive in; Inconsistent Policy Despite the advent of the cryptocurrency industry, regulators still have not addressed how certain types of transactions, such as airdrops and fork transactions, should be treated on a tax basis. The IRS issued a notice in 2014 stating that it did not have any official guidance on treating certain types of transactions. There is still a lack of clarity regarding the law. Hence, it is up to the professionals to interpret it and draw parallels between the transactions and the l...