What does regulation look like around the world?

Cryptocurrencies are increasingly integrated into modern financial reality, and like other assets, they are taxable.

As a relatively new and rapidly growing asset class, cryptocurrencies are attracting increasing attention from investors and governments. As the global economy adapts to this digital innovation, countries are adopting different cryptocurrency regulations and taxation approaches. How do cryptocurrency tax policies work around the world?

Which countries require you to pay taxes on cryptocurrencies?

It is absolutely impossible not to pay taxes in the United States; authorities are very strict on this issue and tax almost everything, including digital assets.

It is treated as property, not as a cryptocurrency. This means taxpayers must pay capital gains tax when selling cryptocurrencies. The profit is subject to short-term or long-term capital gains tax rates, depending on how long the asset is held (less than a year or more).

Crypto taxes in the USA | Source: Kraken

In the UK the picture is much the same; Cryptocurrencies are taxed like other assets. Capital Gains Tax (CGT) applies to income above the tax threshold. If the income from cryptocurrency trading exceeds a certain amount, the taxpayer must file a tax return and pay taxes.

The Australian Taxation Office also classifies cryptocurrencies as assets. Investors must pay capital gains tax if they sell their tokens at a profit. But there is a small explanation; In some cases, cryptocurrencies used to purchase goods and services may be exempt from tax if the transaction amount does not exceed $10,000.

In general, Europe is ahead, and Switzerland is in the lead: the Federal Tax Administration (FTA) says that some residents of this country can not only pay for their purchases with cryptocurrency, but also pay their taxes:

“If salary or benefits are paid to the employee in the form of payment tokens, these are taxable as income from gainful employment 5 and must be shown in the salary certificate.”

Why don’t some countries pay taxes on cryptocurrencies?

Some countries encourage the use of cryptocurrencies due to the lack of mandatory taxation; In this way, authorities are trying to attract investors and create cryptocurrency startups.

Portugal has become one of the few countries where citizens are exempt from paying taxes on income from cryptocurrency trading. There are exceptions where cryptocurrency is used in professional activities or business.

Cryptocurrencies held for more than a year in Germany are not subject to tax when sold. This creates an incentive for long-term investment in crypto assets. However, if the cryptocurrency is sold before this period, the profit will be subject to capital gains tax.

Malta is actively developing its crypto industry and offers favorable taxation conditions. Cryptocurrencies are taxed only when they are sold or exchanged for fiat currency; otherwise no tax is applied.

Crypto taxes in EU | Source: Protoss

However, there are countries where there is no need to pay taxes because cryptocurrencies are banned.

Countries where cryptocurrencies are banned

China is one of the most famous countries to ban cryptocurrencies. In 2021, all cryptocurrency transactions were banned and regulators were actively interfering with mining. This situation has created significant problems for investors and crypto companies in the country.

The use of cryptocurrencies, including trading and mining, is strictly prohibited in Algeria. The African country does not allow cryptocurrency transactions, including exchange and sale, making it impossible to carry out such transactions in the country.

Cryptocurrencies are also banned in many other countries such as Morocco, Pakistan and Indonesia, most of which are located in the MENA and Asian regions.

Why don’t some countries pay taxes on cryptocurrency?

In addition to the ban and investment attractiveness, some countries do not pay taxes on cryptocurrency for a simple reason: Authorities have not yet developed regulations for digital assets.

For example, while Japan has recognized Bitcoin (BTC) and other cryptocurrencies as a legal means of exchange, many aspects of their regulation are being developed. Although the country has various rules regulating cryptocurrency exchanges, there are many gaps in the legislation regarding certain taxation factors.

In Nepal, cryptocurrencies are still not clearly regulated but are effectively banned. Cryptocurrencies remain in a legal vacuum as the government has not developed legislation to regulate this asset class.

What’s next for cryptocurrency taxation?

Cryptocurrency taxation varies from country to country, leading to different approaches to regulating and taxing digital assets. While some countries are actively developing tax policies and regulations regarding the use of cryptocurrencies, others remain in legal limbo and some ban their use altogether. However, according to Chainaliz, cryptocurrency adoption continues to increase globally.

Source: Chainaliz

Cryptocurrency taxation is therefore likely to continue evolving towards greater clarity and regulation, providing stability for investors and market participants. However, depending on the region and political environment, changes may occur unevenly.