Updated: Mar 5, 2020
By Darko Kolaric
Update note from Finmail: The title is slightly updated to accommodate to the article.
Accepting the use of cryptocurrency, although uncertain and symbolic at first, reached a level that no one expected.
After bitcoin, many cryptocurrencies have emerged and according to some estimates, around 2,500 different virtual currencies are currently in use, individually more or less successful.
The number of users who own and use cryptocurrencies is rapidly increasing. It is not possible to accurately determine the number of users, primarily because of their anonymity, but some estimates suggest that around 20% of the world's population uses cryptocurrencies.
Although the value of virtual currencies is variable, some indicators suggest that their total value is around $ 800 billion. From the above, it is more than obvious that cryptocurrencies are experiencing their expansion in spite of all the weaknesses and gradually conquering the financial market. In the last column, we mentioned the Ohio tax authorities' rethinking of accepting bitcoin as the currency to pay tax liabilities. Recently, the US Internal Revenue Service (IRS) also included a cryptocurrency item in its tax return forms.
This means that US taxpayers are required to report the cryptocurrencies they own, that is, the income they have earned in the cryptocurrency to pay tax on that income, at the rates set by the IRS, or the US Treasury. The mere fact that the IRS is considering revenue in virtual currencies supports the fact that virtual currencies are becoming increasingly important and can no longer be ignored. .The US Tax Administration also takes into account the creation of new hard fork cryptocurrencies, which we wrote about in previous installments. More specifically, the interest of the IRS comes down to the question of whether the added value, that is, revenue, has been achieved through this? If revenue is generated, that revenue must be taxed. If the hard fork fails and if revenue is not earned, no tax will be charged. Then the failure to form a new cryptocurrency is seen as a failed investment and not subject to tax. To clarify which actions with virtual currencies are taxed and which are not, the IRS issued specific guidance that should resolve these dilemmas. However, there are still many uncertainties, and additional tax policy-making activities are needed primarily in the IRS itself.
It is difficult to say whether and what the fate of the various cryptocurrencies will be. What is certain is that it will survive in some form and that the process is irreversible. Based on the indicators so far, we can expect further expansion of virtual currencies