Understand Crypto Assets Taxation

Learn how users, traders and institutions participate in the expanding crypto economy and what are the tax implications.

Antonia Eilander
September 22, 2023
min read

Cryptocurrency has had several names/terms used by regulators to define it over the years.

Historically, it began with the term Bitcoin, because it was the first crypto currency on the market. Now, since there are thousands of them, regulators use broader terms, such as: virtual currency, crypto assets, cryptocurrency, digital asset, digital currency, virtual asset, digital financial asset, DLT asset and electronic currency. Below, you can see the list arranged in popularity order:

  • Virtual Currency
  • Crypto assets
  • Cryptocurrency
  • Digital assets
  • Digital currency
  • Virtual asset
  • Digital financial asset
  • DLT asset
  • Electronic currency 

Types of Crypto Taxpayers

There are two types of crypto taxpayers:

  1. Individual Investors: Their taxes depend on the frequency and size of their transactions. It also depends on whether they invested their crypto or hold it with speculative intent.
  1. Business (Trade) Companies: Their taxes depend on whether they occasionally or regularly trade crypto. 

How is crypto taxed?

As it is with fiat, there are several types of taxes applicable to crypto. Most jurisdictions have not amended their tax laws to specifically address the treatment of crypto assets. Therefore, it is important to remember that general principles of the jurisdiction's tax law will apply to crypto assets. However, the tax authorities of a number of countries have issued some administrative guidance on how the general tax laws will apply to crypto assets. Please follow @O2K on LinkedIn (link below) to keep up to date with all new guidance and regulation.

Several countries have provided a framework for addressing different types of crypto assets, showing that a consistent taxonomy is beginning to emerge - France, Germany, Singapore, and Hong Kong have classified crypto assets as payment tokens, utility tokens, or security tokens. Although cryptocurrency and other payment tokens are intended to be used as a medium of exchange, a unit of account, and/or a store of value, similar to a currency, very few tax authorities have indicated that cryptocurrency will be treated as a currency for tax purposes.

In 2022, only a few of the countries from the OECD report consider crypto currencies to be similar to currency for tax purposes: this is the case in Belgium, Cote d’Ivoire, Italy, Malta and Poland. Other countries treat crypto assets as some form of property, and importantly, the classification of that property differs from country to country. Thus, in these countries, transactions in crypto assets (whether they are exchanges of crypto assets for fiat or exchange for other crypto assets and etc.) are subject to the general tax rules. In many cases, this means the transactions are taxable, but some countries provide exceptions to the taxation of personal or investment activities of individuals. We already mentioned that the 2 types of crypto asset users are individual and business users. The distinction between individual investors (or natural persons) and business (or trade) companies (also called legal entities) is vital for the tax treatment.

Sometimes, lower taxes or exemption from taxes are applicable to both parties, and there are also different taxes already widely applicable to crypto assets. For more learning on who users could be (like miners, exchange platforms, trading platforms, wallet providers and etc.), and the types of taxes that are or might be imposed on crypto assets in several jurisdictions, take our courses on this topic.

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