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Cryptocurrencies have come a long way. From being speculative products that few dared to enter, they are now a flourishing investment opportunity. Non-Fungible Tokens (NFTs) and other digital currencies are now more widely accepted. However, the decentralized technology behind them has the potential to disrupt the traditional financial system. That’s why governments, legislators, and financial think tanks around the world have been evaluating its use cases. India introduced a tax on all ‘virtual digital assets’ from April 1. Any income from the transfer of digital assets would be taxed at 30 percent with no deductions or exemptions. The 30 percent flat tax rate will apply even to the donation of digital assets and a 1 percent tax deductible at source (TDS) will apply to every transaction involving crypto. But different countries are trying different approaches to manage the crypto revolution. While some have fully embraced them, others have imposed bans or restrictions. (Image: Shutterstock)
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The Savior: This South American country has been one of the biggest proponents of cryptocurrency adoption. In September 2021, El Salvador became the first country to adopt Bitcoin as legal tender. This means that all businesses and retailers in the country must accept bitcoin as digital payment for products and services. The president is even planning to create a ‘Bitcoin City’ where bitcoin will be free of property and capital gains taxes.
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Russia: Russia has approved the legalization of cryptocurrency and is ready to implement laws to govern it. The current draft of the laws suggests that cryptocurrencies will likely be treated like foreign currencies, according to media reports. This means that licensed providers will be able to transact in cryptocurrencies. However, for daily transactions, the crypto tokens will need to be converted into rubles first. And any cryptocurrency transaction above 600,000 rubles will need to be declared to the appropriate tax authorities. (Image: Shutterstock)
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China: The emerging global powerhouse has been mostly hostile towards cryptocurrencies and mining activities. Chinese President XI Jinping initially made a statement in favor of blockchain technology in 2017. But fearing the impact of unrestricted cryptocurrency trading on China’s economic performance, the country completely banned any trading of virtual assets in 2021. Even before the trade ban, China brought a crackdown on bitcoin mining activities in the region, citing environmental concerns.
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Japan: Japan has taken a progressive stance on crypto regulation. They recognize cryptocurrencies as legal property under their Payment Services Act (PSA). Crypto exchanges in the country must register with Japan’s financial services agency and comply with anti-money laundering obligations. Earnings made from cryptocurrency fall under the category of miscellaneous income. Tax rates on crypto earnings depend on income, but people with higher incomes can pay taxes of up to 55 percent. (Image: AP Photo)
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United Kingdom: All companies and startups involved in crypto-asset activities in the UK must register with the country’s Financial Conduct Authority (FCA). Crypto asset businesses there are required to apply for an ‘Authorized Payment Institution License’. They must also comply with current anti-money laundering measures. Under UK common law, crypto assets like bitcoin are also recognized as property. As such, the disposal of crypto assets is subject to capital gains tax. It is 20 percent for higher taxpayers and 10 percent for basic rate taxpayers.
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European Union (EU): Cryptocurrency transactions are legal in most European Union countries. But the governance of individual countries may vary. Tax laws also vary from country to country, ranging from 0% to 50%. In 2020, the European Commission recommended the Regulation of Markets in Cryptoassets (MiCA) framework to increase consumer protection and introduce new licensing requirements.
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Canada: The Canada Revenue Authority (CRA) treats cryptocurrencies as a commodity under the country’s Income Tax Act, according to a Thomson Reuters Institute report published this year. The country also recently expanded its anti-money laundering and terrorist financing monitoring laws to cover cryptocurrencies on crowdfunding platforms. The move is seen as a response to anti-vaccine protests in the country allegedly with resources obtained from bitcoin crowdfunding. (Image: Reuters)
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South Korea: The country does not consider cryptocurrencies as financial assets. This means that cryptocurrency transactions are not subject to capital gains tax. The Financial Supervisory Services oversee cryptocurrency exchange regulations in the country. Exchanges must also follow strict anti-money laundering guidelines set by the FSS. In late November, the country delayed its cryptocurrency tax bill until 2023. The bill would have levied a 20 percent capital gains tax on profits over 2.5 million won ($2,122). .
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Australia: Australia classifies cryptocurrencies as legal property; this makes them subject to capital gains tax. Exchanges can only operate in the country if they are registered with the Australian Transaction Reporting and Analysis Center (ATRAC) and meet the necessary anti-money laundering obligations. The Australian tax office considers cryptocurrency to be an asset for personal use if it is used to buy goods or exchange with another currency. However, it is not an asset for personal use when used for investment. Personal-use assets are generally disposed of when used, so they are subject to capital gains tax (CGT).
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Singapore: The country has been something of a pioneer in cryptocurrency regulations. Cryptocurrency trading is legal there and is regulated by the Monetary Authority of Singapore (MAS) under the Singapore Payment Services Act. Companies can also obtain a license to carry out exchanges. There is no capital gains tax in Singapore and the appreciation of an asset does not require individuals or companies to pay tax on them. However, individuals must pay 17 percent income tax if they are involved in cryptocurrency business.
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