Many people are now actively thinking about what to do with cryptocurrencies (CCs) because they do not want to lose tax revenues and think they need to regulate this market area to protect consumers. It is commendable to consider consumer protection at this level, knowing that there are cases of fraud and hacking and theft. The Securities and Exchange Commission (SEC) was formed in the United States for this purpose, and the SEC has already introduced some rules for exchanges and transactions. Other nations have similar regulatory bodies, and most are working to develop appropriate rules, and it is likely that “rules” will be dynamic over a number of years as governments discover what is good and what is not. Some of the advantages of the CC are that they are not controlled by any government or the Central Bank, so it can be an interesting debate for many years to see how much regulation and control will be applied by governments.
A greater concern for most governments is the potential to increase revenue by taxing profits in the CC market space. The central question to be addressed is whether to consider CC as an investment or as a currency. Most governments tend to view CCs as an investment as a capital gains model for every commodity whose profits have so far been taxed. Some governments view the CC only as a currency that fluctuates in its daily relative value and will use similar tax rules for foreign exchange investments and transactions. It is interesting that Germany walks along the fence here, it was decided that the CC was used directly to buy goods or services. If we used all our capital gains to buy something directly, it would seem a bit chaotic and unprocessed if we could not be taxed every time we said a new car. Maybe Germany will adjust its policies well or reconsider as it continues.
Given the lack of consistent global laws requiring CC exchanges to report CC transactions to the government, it is more difficult for governments to enforce tax rules. The global and distributed nature of the CC market makes it impossible for any nation to know all the transactions of its citizens. Tax evasion already occurs because there are many countries that provide global banking services, are used as a tax haven, and take refuge in taxes. Nature CCs were born in a field of little regulation and control by governments, and this has both disadvantages and disadvantages. It takes time for governments to do all of this through trial and error – it’s still new, and that’s why we’re introducing CC and Blockchain technology as “game changers.”