Taxing cryptos would be good for the market!
Right now if you mine bitcoins, sell them, or use them to buy stuff in the U.S, you will be taxed for it. That’s because the internal revenue service now considers bitcoin as a taxable asset.But the U.S is not alone in the bid to regulate and tax cryptocurrencies. Other countries are joining in too. Germany is already making calls for an international regulatory framework that will allow for the taxation of cryptocurrencies, as well as introduce government regulations into this space. With the international community increasingly becoming unanimous on how to handle cryptos, the question then arises, how will this affect the market?
The positive effects of taxation on the crypto markets
1. The market will gain legitimacy
As you know, anything that attracts government taxation is considered legal and legitimate business. That’s why people who engage in the business of illegal drugs don’t pay taxes, but we all know the penalty that comes with such business. In essence, when governments across the world are talking of regulation and taxation, investors especially big money investors are likely to come in, since they are sure that they are putting their money in a legitimate business, one that will not put them in conflict with the law.
2. Governments can use this tax to improve lives
The fact that cryptos are adopted even in the poorest of countries creates an additional and much needed revenue stream for governments in poor countries.That’s revenue that can help them improve the lives of people through education, health and other initiatives. On top of that, as investors in the richer nations get to learn of this positive aspect of cryptos, ethical money will flow in, and the value of the market as a whole will grow.
3. The market will attract retirement funds
One of the biggest sources of liquidity in all financial markets is retirement funds, both individual and corporate. Part of it is because when retirement money is put in an asset, it gets tax deferments. This aspect of retirement taxation will push in retirement funds into the crypto markets and the result will be an increase in market liquidity. Consequently, this will attract big players into the market, and push the market up, for the benefit of all investors.
The risks of taxation on cryptocurrencies
One of the greatest risks to taxing the crypto markets is that it will require an end to anonymous trading. That’s an antithesis to the whole concept of cryptocurrencies. As such, if governments across the world decide to regulate and tax cryptos, investors cold flee, leading to market collapse. The market has seen this in the last few weeks after it crashed on news that South Korea will put to an end anonymous trading as of January 30th.
The verdict
The positive effects of taxation on the cryptomarket clearly outweigh the negatives. Besides, even after several weeks of this issue coming out all across the world, the market seems to be relatively stable. This could point to the fact that a global tax regime on cryptos won’t have any long-term negative effects on the market.