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Paying capital gains tax on everyday expenses does not please many, so it's understandable that there are some concerns about the future project Bakkt solution. Among other things, the Intercontinental Exchange (ICE) company would provide Bitcoin-to-Fiat conversions to businesses that simplify exchanges between merchants and consumers.
As far as adoption by merchants is concerned, the Bakkt offer seems ideal: it would allow integration companies to accept cryptography without having to worry about understanding or even about treatment. The company's partnership with Starbucks means that before long, cryptocurrency enthusiasts will be able to spend their coins in their cafe.
A brief overview of cryptocurrency law and taxation
In the United States, cryptocurrency is treated as a property for taxation purposes. This means that any transaction (crypto-crypto, crypto-crypto or crypto payment) must be recorded so that you can calculate the tax later before being declared to the IRS. It is already difficult for traders to use more than one stock market to effectively track their investments in cryptography, and this before widespread commercial acceptance.
As with all exchanges on a stock exchange, coffee purchases in Bitcoin must be recorded. This poses a challenge to its key outlook, as purchases made in USD would be preferable to tax liabilities.
It's not as bad as it seems
Realistically, initial fears about tax laws preventing the use of cryptocurrency as currency may be somewhat misguided. Coin Center, a non-profit research and advocacy organization, discussed the can be changed with a de minimisexemption cover crypto-currencies so as not to take into account price fluctuations.
In addition, it seems that the Token Taxonomy Act is gaining ground. Presented in a bill by Congressmen Warren Davidson (R) and Darren Soto (D) last year, the law would revise the Securities Act of 1933 and the Securities Exchange Act of 1994 to codify the treatment of tokens and cryptocurrencies.
Perhaps more specifically, it would exempt transactions "other than cash or cash equivalents" provided they do not exceed $ 600. In other words, the purchase of a cup of coffee for less than $ 600 is exempt, but the cashing of a few hundred dollars remains subject to the tax.
These amendments to the existing laws would require a lot of momentum and support, but it is hard to deny that they are a step in the right direction towards mbad adoption of cryptocurrency.
Exempting transactions swaps a headache against another. Even in the case of exemptions making cryptocurrency usable in daily trading, it would still be necessary to keep an audit trail to prove that crypto had been disposed of properly.
For this, the best solution is for individuals to use software solutions that record, report exemptions and automatically calculate taxes at the end of the tax year. When it comes to taxation, the best strategy is always to keep accurate and transparent records of transactions.
The future of cryptocurrency is unquestionably a widespread adoption. As regulators gradually accept the nuances of emerging technology, illogical legislation that undermines this goal will likely have to soften and adapt to reflect the growing interest.
By Sean Ryan and Perry Woodin, founders of NODE40
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