The United Kingdom and the United States are inching closer to more transparent crypto regulations. In the UK, a group of lawmakers created a forum to outline regulations for the crypto industry called Crypto and Digital Assets Group. It is supported by the digital asset trade association, CryptoUK.
The New York State Department of Financial Services, on the other hand, has elected a deputy superintendent of cryptocurrency. The department stated that this position is going to focus on digital currencies, virtual currencies, blockchain, and other related technologies and products. Does this change the existing crypto tax form? Let’s find out.
Crypto Ambivalence Reigns
At the time of writing this, the value of Bitcoin had fallen below the $20,000 mark. Therefore, a lot of investors are considering it a high-risk asset. High-ranking officials aren’t helping cryptocurrencies’ case either. Andrew Bailey, the Governor of the Bank of England, has warned banks to be “extra cautious” when engaging in crypto until new rules are put in place by regulators.
According to Chainalysis, a blockchain analysis firm, crypto-related crimes have reached the highest in 2021. However, the report also stated that the growth in cryptocurrency far outnumbered crypto-related crimes. As the UK and the US grappled with the regulatory framework, more than 50 countries have banned crypto handling, especially China.
What’s at Stake?
The volatile and uncertain nature of crypto and the development of regulatory frameworks are hindering its mass adoption. The majority of large institutional players such as pension funds are waiting to see more regulatory transparency before getting involved. Even the upper brass at multinational companies are looking for clear regulations before getting involved in cryptocurrencies and blockchain.
Once the regulations are in place, they will reassure worried customers about the legitimacy of cryptocurrencies and alleviate their concerns. Approx. 69 percent of traders under 40 believe that cryptocurrencies aren’t properly regulated and 68 percent of young traders compare crypto investing with gambling, according to the UK Financial Conduct Authority.
In the US, a person involved in virtual currency business activity must get a BitLicense. Also, people who engage in crypto activities and don’t trust companies or a bank have to register with the AG’s Investor Protection Bureau. Organizations working in New York know that they have to be both Martin Act and BitLicense registrants. However, a few virtual currency players have declined entry into the market.
Crypto Tax Forms
Even though the UK and the US are working towards creating a more transparent regulatory crypto framework, the crypto tax forms for both countries are not changing at the moment. Anyone who dabbled in cryptocurrencies over the course of 2021 will have to file a tax return using crypto tax forms. If you sell crypto tokens for cash, send tokens as a gift, buy goods or services with crypto, or trade one token for another, you are subject to paying taxes by filling out crypto tax forms.
To Summarize
The UK and US are taking active measures to create a regulatory framework to put worried investors’ minds at ease and encourage wider crypto adoption. With proper regulations in place, large institutions, as well as investors/traders, can get involved in crypto activities without worrying about regulations.
FAQs
1. What crypto tax form do I use for cryptocurrency?
Even though cryptocurrencies are referred to as virtual currency, in the eyes of the IRS, they are considered property. The IRS Notice 2014-21 confirms that the IRS deems cryptocurrency as property and all capital gains and losses must be reported on Form 8949 and Schedule D if need be.
2. What is cryptocurrency taxed at?
The IRS treats the gains and losses on cryptocurrency the exact same way it treats any other kind of non-digital capital gain or loss. This implies that as a crypto trader, you will need to pay ordinary tax rates on short-term capital gains (depending on your taxable income) for assets held for less than a year and long-term tax rates for assets held for more than a year.
3. How is crypto taxed in the US?
Virtual currency is a digital version of value that serves as a monetary unit, a measure of value, and a means of exchange, but is not a representation of the US dollar or any other fiat currency. The IRS issued Notice 2014-21 in 2014, stating that virtual currency is classified as property for tax purposes.
4. Do you have to pay taxes on crypto every year?
Although most people only pay taxes once a year, there still are ways to save throughout the year. Using ZenLedger, you can learn how to avoid paying taxes on crypto by recognizing tax-loss harvesting prospects year-round, lowering your tax burden, and paying your taxes before the IRS tax deadline of 2022.
