When the world’s seven largest democracies and economic powers meet in Hiroshima in May will Bitcoin and cryptocurrencies be on the agenda? It looks that way, with the G7 planning to discuss tighter regulations and consumer protections when it comes to crypto assets, according to Kyoto news agency’s recent reports. Traditional financial rules aren’t ideal for the digital asset era, and with the G20 and other prominent players already exploring the potential for ICOs and blockchain, the G7’s interest makes sense.
Each G7 country has its own individual approach to the technology, from Japan’s strict regulation of crypto assets to the US’s application of existing financial laws. The European Union has its upcoming markets in Crypto-Assets (MiCA) regulation, while the UK has just recently introduced a special category for crypto assets on tax forms and is prepping a digital pound. Canada classifies digital assets as securities.
At the G20 meeting that recently took place in Bengaluru, India, it was announced that the Financial Stability Board (FSB), the International Monetary Fund (IMF), and the Bank for International Settlements (BIS) would be making recommendations on the regulation and oversight of global stablecoins, crypto assets activities and markets for July and September respectively. And while the IMF has long pushed for an abolition of the legal status for cryptocurrencies, the fund is also currently developing its own interoperable platform for central bank digital currencies.
So then, which countries are the best or worst for crypto taxes and smart tax tips? Let’s explore.
When it comes to regulation and taxation, Japan is one of the leading countries looking out for cryptocurrency users’ rights. A former tax official and current professor at Tokyo’s Meiji University, Toru Otsubo, advocates for strict yet fair regulations of the industry which included a tax exemption for digital traders’ profits, which Japan made into law in 2017. Arguably, this makes Japan one of the most attractive places to trade digital assets.
On the flip side, some countries are more resistant to cryptocurrency, with China even going so far as to ban citizens and financial institutions alike from trading Bitcoin or any other digital assets.
In the US, the situation isn’t so clear cut. Virtual currencies are still considered property by the IRS and are thus subject to capital gains taxes. On top of that, US citizens are also subject to FATCA (Foreign Account Tax Compliance Act) regulations, which means any time you move funds across the border you potentially have to report it to the US authorities.
Things are a bit different in the EU. The upcoming MiCA regulations will bring with it much-needed clarity but also some potential tax-related issues. If the crypto asset being traded is considered a security, then capital gains taxes will apply, whereas if the asset is classified as a currency, then it will be covered by other taxation laws.
Crypto taxation is a complex topic and one in which governments around the world are starting to define their stance; so far, though, Japan and the EU appear to lead the pack in terms of tax regulation and fair taxation.
For individual traders, there are some steps you can take to make sure you are always up to date with the relevant laws and regulations, such as regularly reviewing the list of countries that have set cryptocurrency-specific rules for their citizens and companies, and setting a comprehensive budget plan to account for potential taxes.
It’s also wise to maintain records of all trading activities, whether that be in the form ofledgers, records, or receipts. Additionally, keeping an eye on convenient, secure wallets to save and transact tokens, coins, and cryptocurrencies, while also taking advantage of deductions, such as those offered to miners, are smart moves.
Though the G7’s discussions may be initially worrying to cryptocurrency traders, regulations and tax plans of one form or another are inevitable. With more countries warming up to crypto and blockchain technology, an eventual favorable standpoint on crypto taxes is likely.