Category: Cryptocurrency Tax

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Bitcoin Crypto News Cryptocurrency Tax

Libertarian Ron Paul Says “Bitcoin Should Be Legalised As Money”

Ron Paul, former US Congressman and Libertarian Party candidate for the 1988 US presidency, has put forward a strong case that Bitcoin should not be regulated.

In an interview last week with Michelle Makori of Kitco News, Paul told how supporters of one of his three presidential nominations designed a coin bearing his image called “the Ron Paul Dollar”.

They got into big trouble. They could not use the word ‘dollar’ as it encroached on the [US] government’s monopoly control of money.

Ron Paul

Referring to popular wisdom that Bitcoin will inevitably replace the US dollar, Paul expects the greenback to survive. “It’ll still be around, though it won’t be worth much,” he said.

Legal tender laws force you to use legal tender, so [the US government] won’t allow you to replace the dollar with cryptocurrency. There will be laws against that, but I want to legalise it.

Ron Paul

Ron Paul Interview

With Bitcoin facing regulatory pressures in countries such as China, investors worry that similar limitations will be placed on cryptocurrency in the US.

“Right now, if you buy and sell gold, it’s subject to tax,” Paul said. “If you make a profit in Bitcoin, you read stories about people getting taxed on it. You can’t tax money … If you bought a dollar a year ago and it went down 10 percent, you can’t take a loss because your dollar lost value.”

Governments will always try to suppress alternative currencies, Paul noted, but he said the free market ultimately should be allowed to decide. “I will argue more the case for legalisation of freedom of choice,” he said. “The people should make the decision, not the government.”

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Australia Crypto Exchange Crypto News Cryptocurrency Tax Monero Trading

Australian Project Enables Bitcoin And Monero Direct Swaps

COMIT Network, an Australian-based decentralised exchange (DEX), now allows atomic swaps between Monero and Bitcoin.

This means users can directly swap Monero (XMR) for Bitcoin (BTC) without intermediaries. This is currently only available on wallets that support the new functionality. Modern crypto wallets such as Samourai Wallet proved earlier this month that atomic swaps using XMR is working.

“The decentralized Monero exchange technology is here, so now it’s a race for wallets to provide the best user experience. With such high user demand for easy and private peer-to-peer exchanges, it’s only a matter of time before wallets widely implement them.”

Justin Ehrenhofer, an organiser of Monero Space.

The Monero community is working with the Australian COMIT project to build a PoC (Proof of Concept) DEX for the BTC-XMR direct swaps.

Traders Are Using Monero To Avoid Taxes

Monero is best known for its private and fungible characteristics, like hiding the sender, receiver and amount details for all transactions. This allows crypto traders to use XMR to avoid crypto taxes.

This is made possible as XMR uses a special advanced cryptography to facilitate anonymous transactions on decentralised exchanges. This makes it very difficult to prove who actually owns a Monero token.

The Australian Tax Office (ATO) warned crypto traders to report their cryptocurrency holdings in this years tax returns, which could directly affect up to 600,000 aussies.

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Crypto News Cryptocurrency Tax

US Treasury Declares War Against Crypto Tax Evasion

On May 28, the Biden Administration released the 2022 Budget Proposal, as the US Treasury calls for more detailed crypto reporting requirements to combat tax evasion.

US Treasury Claims Tax Evasion On The Rise

A statement by the US Treasury claimed that tax evasion using crypto assets is a rapidly growing problem. “The global nature of the crypto market offers opportunities for taxpayers to conceal assets and taxable income by using offshore crypto exchanges and wallet providers.”.

This follows related news that Biden is introducing a new tax proposal for businesses in the US to report crypto transactions over US$10k.

Australia Tax Time Approaching

It’s not just the U.S. cracking down, but also in Australia as we see the ATO warning crypto traders that they will have to report their gains. It is expected that over 600,000 aussies have participated in the cryptocurrency market and an estimated half of those will need to submit their tax returns with their crypto profit and loss.

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Australia Crypto News Cryptocurrency Tax

ATO Warns Crypto Holders To Report Crypto Gains

On Friday, the Australian Tax Office (ATO) stated that they are expecting all cryptocurrency-related income to be reported for taxation purposes.

600,000 Aussies Expected To Report In

According to Tim Loh – ATO Assistant Commissioner – over 600,000 Aussies have recently invested in cryptocurrencies, and all of them are expected to report in. 300,000 taxpayers will reportedly be prompted to include crypto gains and losses on the tax sheet as they fill out their forms this year. A further 100,000 will be requested to review their previously lodged tax returns.

Tim Loh also stated that he found it strange that many people thought cryptocurrency was anonymous and couldn’t be tracked. Additionally, reporting applies to Non-Fungible Token sales, purchases and trades as well. However, keep in mind that if you’ve been HODLing for 12 months or more, you may be entitled to a Capital Gains Tax (CGT) discount, assuming you’re in the green.

The best tip to nail your cryptocurrency gains and losses is to keep accurate records including dates of transactions, the value in Australian dollars at the time of the transactions, what the transactions were for, and who the other party was, even if it’s just their wallet address.

Tim Loh, ATO Assistant Commissioner

The tracking is being done via the Financial Data Matching Protocol, which has been active for a while in conformity with the Office of the Australian Information Commissioner’s Guidelines on Data Matching in the Australian Government Administration.

Cryptocurrency tax can be complex so the ATO has also made available a factsheet providing tips and information about how CGT applies to cryptos.

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Australia Bitcoin Cryptocurrency Tax

Australian Crypto Collateralized Loans Tax Questions Answered

What is a Crypto Collateralized loan?

A crypto collaterized loan is a type of borrowing where you stake cryptocurrency as collateral to borrow against funds receiving (typically another cryptocurrency).

Example of a crypto collaterized loan

For example to apply for a loan of $1,000 AUD worth of USDT stablecoin you could use $2,000 AUD worth of Bitcoin (BTC) as collateral which would set the LTV (Loan to Value Ratio) to 50%.

  • Borrowed Coin = The crypto that you borrowed from the loan.
  • Collateral Coin = The crypto that you used to fund for the loan.

This type of loan is also known as a CLO – collateralized loan obligation, where the Collateral Coin price vs the Borrowed Coin price can fluctuate based on the market directly affecting the LTV of the loan and produce a margin call or even liquidation.

Below are some common tax questions to help you with your fiat-liquidity crypto collaterized loan decisions.

Common Crypto Loan Tax Questions Answered

ASIC Rulings on Loans?

All lenders must be licensed with ASIC and have an Australian Credit Licence Number to be able to offer loans in Australia. Majority of crypto backed loans currently available are via non-Australian companies, and therefore don’t fall under the ASIC lending rules for offering crypto loans. Be aware that you are not protected under ASIC when taking a loan from an overseas crypto loan provider if problems were to occur.

Can you claim back the interest on the loan as a tax deduction in Australia?

If you have taken the loan for personal reasons, then the loan and the interest portion of the loan are not tax deductible. If the loan is being used for either business purposes or investment purposes, then the interest paid portion of the loan can be claimed back as a tax deduction against the earnings received from the business activity or investment income earned. It is best to seek professional advice to determine tax deductibility as everyone’s circumstances are different.

Do you pay capital gains tax on the Bitcoin once you’ve closed off the loan?

Because you have collateralized your loan with crypto, you still hold ownership of the original crypto that was collateralized. You would pay capital gains tax as normal upon disposal of that crypto. For the crypto that is received (the loan), if the value goes up in the time you received the loan to when you dispose of that crypto, then you will pay capital gains tax. If however, the value goes down, then it would be classed as a capital loss on disposal.

Are there any tax differences between lenders? Or its all the same?

There is no tax differences between lenders, except for the interest rate. If you have a higher interest rate, then you will receive a higher tax deduction if the loan is not for personal reasons. The main difference to consider between lenders would be creditably of the loan provider so check if they have an Australian Credit Licence Number with ASIC.

Do you pay tax on the loan when you borrow it? Ie If you borrowed $3,000 worth of LTC and then transferred it to AUD and withdrew it to your bank account.

You are not required to pay tax on the value of the loan borrowed but if the value of the crypto increases prior to disposing of it, then you would be required to pay tax on the difference. For example, if you borrowed $3,000 worth of LTC held on to it for a few days, then sold the LTC to AUD but because LTC value had increased over those few days, the value of AUD ($3,200) received into your bank account would be higher than $3,000. You would be required to pay tax on the difference being $200 capital gain. If you withdrew LTC to AUD bank account at the same value that you borrowed it, then although it is a disposal of LTC you would have no tax to pay.

If you repay (close) your loan and your Collateral Coin increased in value do you pay tax on that? It’s an unrealised gain so no right? However, if the value decreased are you able to claim that back (offset) somehow?

It only becomes a taxing event on disposal of the collateral coin. So if the value increases and you haven’t sold the collateral coin, then the gain is unrealised and not taxable yet. Likewise, if the value decreases and you haven’t sold the collateral coin, then the loss is unrealised, and not a taxable event until sold and therefore you are unable to claim the loss against other income.

If the loan gets liquidated, whats the Tax implications on that?

If the loan gets liquidated, then this means the crypto gets disposed to cover the loan. It becomes the taxing point for the crypto disposed. If the liquidation price is higher than the original purchase price of the crypto it will be a capital gain, otherwise it will be reported as a capital loss. Note that capital losses cannot just be offset against other ordinary income, they can only be offset against capital gains.

If you adjust the LTV ratio or or get a margin call and put more Collateral Coin into the loan, does that affect the tax in any way?

As long as you are not disposing of any cryptocurrency, then it is not a tax event. For example, if you just put more Collateral Coin into the loan, you are reducing the risk of the loan being margin called or being liquidated.

Does a Crypto Backed Loan get taxed differently if I am a Crypto Trader instead of a Crypto Investor?

If you are classified as a crypto trader because of the volume of crypto transactions that you are involved with, then you may not be able to use the capital gains method, which means that any unrealised gain you may make by the end of the financial year (30 June) will be taxable.

Any specific ASIC considerations for collateralized loans?

N/A

How to Get a Bitcoin Backed Loan in Australia

See our guide on How To Get A Crypto Backed Loan With Binance Australia for instructions on how to apply for a Bitcoin backed loan within Australia.

The answers in this article we’re provided to us by an Australian Tax Expert. If you spot any mistakes, or have any additional questions you would like to ask, please let us know.

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References

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Crypto News Cryptocurrency Tax Institutions Regulation

Biden’s New Crypto Tax Proposal For Businesses To Report Crypto Transactions Over $10k

On Thursday, U.S. President Joe Biden provided details on how the administration plans to generate an additional $700 billion USD in revenue from tax collection. Businesses will need to report on cryptocurrency transactions over $10,000.

According to a recent report released by the Biden administration, the U.S. will upgrade the capabilities of the IRS in effectively stifling tax evasion and bring some standardisation to the laws regarding cryptocurrency reporting for businesses.

As the crypto market reached $2 trillion USD earlier this year, which seems to be turning some heads until the recent crash, more attention has been given to crypto.

Some proposed measures are aimed at cryptocurrency, including a requirement that crypto exchanges report gross receipts and purchases. It also calls for businesses receiving crypto to report on transactions larger than $10,000 from 2023 — a standard that already exists for cash transactions.

This is good news in a bad week for crypto. The U.S. government essentially just admitted crypto is here to stay, and now they are making policies and laws to help with the regulation thereof.

More Power To The IRS

The IRS will be provided with additional resources in order to combat advanced methods of tax evasion, since “Cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly including tax evasion,”. The IRS will also be allowed to access more information through “Financial institutions would add information about total account outflows and inflows to existing reporting on bank accounts” and “The reporting regime would also cover foreign financial institutions and crypto asset exchanges and custodians.”

The IRS still relies on Individualand Business File Systems that date back to the 1960s—the oldest in the federal government. The result is decades upon decades of tax administration built upon a system that is written in a programming language that is no longer taught, and where
new functions are added in a patchwork rather than integrated manner

The American Families Plan Tax Compliance Agenda

The Biden administration wants to give the I.R.S. $80 billion over the next decade for technological upgrades and to increase staff with specialised expertise in the required areas. The report also states that the IRS’s outdated technology currently combats around 1.4 billion cyberattacks yearly and is in need of dire upgrades. These upgrades aren’t just for catching the baddies, this work can also “help avoid unnecessary, costly and burdensome audits of compliant taxpayers.”

Standards For CBDC’s

The Fed admits that Distributed Ledger Technology (DLT) and crypto are changing the world, and it is important to understand and be ready for these changes in the financial system. They have also acknowledged they are experimenting with a Central Bank Digital Currency (CBDC), but it will not replace current forms of settlement.

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Binance Crypto Exchange Crypto News Cryptocurrency Law Cryptocurrency Tax

Binance Crypto Exchange Under DOJ Investigation To Target Money Laundering And Tax Evasion

Operation “Hidden Treasure” was initiated by the Internal Revenue Service (IRS) and Department of Justice (DOJ) on Thursday in an effort to uncover the unreported crypto income of U.S. citizens and other illegal activities taking place on the platforms.

The IRS has recently started investigating various crypto platforms to try to discover illicit activities, ramping up its crypto-related auditing and guidance for individuals that own and trade cryptocurrency.

Chainalysis, a blockchain forensics firm whose clients include U.S. federal agencies, concluded last year that among transactions that it examined, more funds tied to criminal activity flowed through Binance than any other crypto exchange. The firm tracked Bitcoin worth $2.8 billion USD that moved on to trading platforms in 2019. Chainalysis determined that roughly 27%, or $756 million, has been hidden on Binance. The exchange has assured regulators that they have done as much as possible to stay within the current regulatory framework.

As recently reported by Bloomberg, the Commodity Futures Trading Commission (CFTC) is also probing Binance (not registered with CTFC) to find out if it allowed U.S. residents to trade derivatives. The CFTC previously filed a civil lawsuit to halt the U.S. commodity derivatives business of BitMEX, which is one of the world’s largest cryptocurrency derivatives exchanges. Exchanges are now, more than ever, under regulatory scrutiny.

The repercussion on Bitcoin price

Bitcoin (BTC) losses accelerated Thursday after Bloomberg reported the Binance investigation.

Many of the top cryptocurrencies dropped in price, down double digits. Bitcoin fell 10% after the news, continuing the negative run it experienced after Tesla announced it would stop accepting Bitcoin as payment for their vehicles.

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Bitcoin Crypto News Cryptocurrency Tax Europe Investing

Bitcoin Trading Tax In Hungary Drops 50% In 2022 COVID Program

Hungary has had a year rougher than most due to the ongoing pandemic. Looking for ways to attract capital in an effort to get back on their feet, they’ve decided to slash taxes on crypto by half.

While Australia is looking at targetting crypto investors, Hungary is taking the opposite approach, by reducing its crypto taxes.

Crypto Taxes Down To 15% in Hungary

In a video posted on Facebook, Hungarian Finance minister Mihály Varga announced that the taxes on capital gains made through cryptocurrencies would be cut from 30.5% to a mere 15%.

Currently, cryptocurrencies are taxed as “other income” in Hungary, as regulations around Bitcoin and other cryptos are less developed than in other EU states.

However, this tax cut would make Hungary one of the most attractive destinations in the EU for crypto investors, alongside countries such as Germany, whose legislation rewards you for HODLing – if tokens are held for more than a year, cryptocurrency is no longer subject to taxation.

Crypto Tax Rates by Country Comparison

Here’s how Hungarian crypto taxes will measure up to other countries:

AustraliaSubject to CGT rates – up to 47%
USASubject to Property Tax – can be up to 37% in the first year
New ZealandSubject to rates for individuals and businesses
Germany0% if held for over a year – 0 tax if transaction is worth less than 600 EUR and tokens were held for less than a year
Hungary30.5% currently, soon to be reduced to 15%
Italy26%, provided profit is over 51,645.69 EUR for 7 days in a row
Spain19% to 23%
Belgium33%
Denmark55%
Israel30%
UKSubject to UK CGT – Income tax may also apply if trades are done frequently
Argentina15%
France33.33%, to be reduced to 25% in 2022
NetherlandsSubject to progressive income tax
Crypto Tax Rates Per Country

While Hungary may not be as far on the road to crypto adoption as states like Estonia, the country is taking important steps toward becoming crypto-friendly, which should attract fintechs and investors from around the globe.

If you’re in Australia and need some help with your Tax then check out the following guides:

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Crypto Exchange Crypto News Cryptocurrency Tax Kraken

Kraken Required To Provide Transactions Over $20,000 USD To The IRS

A Federal Court in Northern California has allowed the IRS to require Kraken to provide information on all users who made the equivalent of $20,000 USD in crypto transactions.

Following the announcement on 5 May the IRS has gotten permission “to serve a John Doe summons on Payward Ventures Inc., and subsidiaries d/b/a Kraken.” This summons stipulates that the IRS may obtain records about U.S. taxpayers that have made transactions over $20,000 USD between the years of 2016 and 2020.

This John Doe summons is part of our effort to uncover those who are trying to skirt reporting and avoid paying their fair share.

Chuck Rettig, IRS Commissioner

Since transactions in cryptocurrencies can be difficult to trace, taxpayers may be using them to hide taxable income from the IRS.

Cracking Down on Crypto Tax Fraud

Tax guidance has been given to U.S. citizens regarding crypto tax and the treatment of crypto as property. These efforts aim to minimise tax fraud through the use of crypto exchanges and digital currencies in general.

In addition to Kraken, Coinbase was previously served a similar order, “seeking information about U.S. taxpayers who conducted transactions in a convertible virtual currency during the years 2013 to 2015”.

Last month, cryptocurrency payments firm Circle also received an order from a federal court in the District of Massachusetts. The order similarly requested identifying documents from all Circle and Poloniex customers who transacted over $20,000 between 2016 and 2020.

Tools like the John Doe summons authorized today send the clear message to U.S. taxpayers that the IRS is working to ensure that they are fully compliant in their use of virtual currency. The John Doe summons is a step to enable the IRS to uncover those who are failing to properly report their virtual currency transactions. We will enforce the law where we find systemic noncompliance or fraud.

Chuck Rettig, IRS Commissioner [source]
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Australia Crypto News Cryptocurrency Tax

Tax Time is Approaching as ATO Targets Aussie Crypto Investors

The Australian Tax Office (ATO) is sharpening its focus on cryptocurrency transactions as Tax deadlines are approaching. Attempting to stop “incorrect tax deductions and claims”, the agency will data-match transactions from different third parties such as crypto exchanges.

ATO assistant commissioner, Tim Loh, said cryptocurrencies are taxable when swapped in crypto exchanges, converted to fiat money or used to acquire goods and services. Bitcoin and other assets are included as capital gains next to sharemarkets and property prices — which have also seen an increase in price since last year.

Can’t Hide Your Crypto

According to Mark Chapman, H&R Block director of tax communications, the ATO will receive detailed records of crypto transactions from third parties such as state revenue offices, accommodation platforms, and crypto exchanges. The agency will then data match with the taxpayer’s tax returns.

You really do need to get it right because the chances are the ATO will know about it anyway through all these third parties

Mark Chapman, H&R Block director of tax communications [The Australian]

Chapman added that ATO’s data matching capabilities have “improved with time” and any crypto-enthusiast who gets caught cheating will face audits, fines, and penalty interest.

As previously reported, the ATO was looking to pressure Aussie crypto-investors since February as digital assets were booming in the country. The agency plans to target up to 1 million Australians who have invested in crypto through an enhanced data-matching program.

It seems so-called money-laundering schemes also sparked the ATO’s interest in scrutinising crypto investigation through cryptocurrencies. According to on-chain data, criminal activity represented only 0.34% of all cryptocurrency transaction volume in 2020.