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The IRS Issues New Cryptocurrency Tax Guidelines

10 October 2019 16:23, UTC
The IRS Issues New Cryptocurrency Tax Guidelines

The Internal Revenue Service has issued new guidelines on the topic of taxing cryptocurrencies and this time it will be including the tax on capital gain regardless of the owner of said digital products being able to liquidate them. According to the report, any and all monetary gain is taxed under the United States law, and since cryptocurrencies have been used as a measurement of monetary gain, they will fall under the relevant rules.

However, the issue with the new guidelines, as outlined by several market experts on Twitter, is that they’re completely irrelevant and don’t consider the variety of ways people get their hands on cryptocurrencies.

The first issue that the new guidelines encounter is an airdrop. Many traders know how it works. A new cryptocurrency is developed and the developers simply hand it out to wallet holders. However, the currency does not immediately have high liquidity, meaning that it’s often hard to exchange into other coins or just cash. Therefore, should the government be aware of an airdrop of an “at that moment useless” cryptocurrency, they will apply relevant taxation.

Imagine if somebody was airdropped a $1 million’s worth of cryptos but it was essentially useless as nobody wanted to buy it at that time. The owner would have to pay the capital gain tax on it in cash and see how the currency depreciated over time as the lack of demand slowly but surely took effect. Many experts say that if this law is heavily enforced, it could spell doom for thousands of cryptocurrencies.

Image courtesy of Accounting Today



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