“Property, unlike traditional government-issued currencies, does not enjoy a de minimis exemption. This is in contrast to how foreign currencies are treated, which do enjoy an exemption,” stated a letter authored by Coin Center. The non-profit organization is known for advocating for policy and legal issues around cryptocurrencies. Their letter addresses the challenges faced by cryptocurrency users when it comes to everyday transactions and taxation.
The letter highlights that every time a person uses bitcoin to make a purchase, it is considered a taxable event. This means that if the value of bitcoin has increased between the time it was acquired and the time it was used, the user is required to report the gain to the IRS at the end of the year. The size of the gain does not matter – even a small appreciation in value must be reported. This creates a significant amount of friction and undermines the practicality of using bitcoin or any other cryptocurrency as a regular payment method.
The perceived lack of fairness in treating property transactions versus foreign currency transactions is a concern raised by Coin Center. While foreign currency transactions are exempt from taxation up to a certain threshold, the same exemption does not apply to cryptocurrency transactions. This discrepancy discourages the wider use of cryptocurrencies in everyday commerce.
These tax issues surrounding cryptocurrency usage have been a topic of debate and concern for some time. The increasing popularity and adoption of cryptocurrencies have drawn attention from government regulatory bodies. Efforts are being made to create clearer guidelines and regulations to address the challenges and uncertainties faced by cryptocurrency users and to ensure fair treatment in taxation.
Coin Center’s letter seeks to bring attention to the friction caused by the current tax policies and urges for a more streamlined and fair approach. As cryptocurrency continues to shape the future of finance, it is crucial for regulatory frameworks to evolve alongside it, fostering innovation and providing clarity for users. Only then can cryptocurrencies truly fulfill their potential as a convenient and efficient method of everyday payment.
❗Follow us on Twitter to get all the latest crypto news as soon as they're out! 🚀
About the author - J-S Tremblay
I've been involved in the cryptocurrency world since 2016 and trading since 2019. I started Moon and Lambo in 2021. I'm passionate about crypto and love to share my knowledge. I hate bankers and I hope that cryptocurrency will change the financial world for the better. View full profile...
View J-S Tremblay website
