With the price of bitcoin constantly fluctuating, holders of the cryptocurrency across the world are becoming concerned about one thing: tax.
Last month, Denmark’s tax minister said regulators were going to look into whether or not to tax capital gains on bitcoin. In addition, India’s income tax department is investigating people who have skipped paying taxes on the money they have made from bitcoin.
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The situation in the US is a bit murkier. Will bitcoin gains be taxed? Will the cryptocurrency be banned under the Trump administration?
What does Trump think about bitcoin?
There were concerns that the Trump administration would move to ban bitcoin back in October last year. When testifying before the Senate Committee on the Judiciary, attorney general Jeff Sessions said the use of bitcoin and other cryptocurrencies on the dark web was a big problem.
“The FBI’s very concerned about [the dark web]. They did take down, I think, the two biggest, dark web sites. This last one, Alphabay, we took down recently. They had 240,000 sites where individuals we selling, for the most part, illegal substances or guns on that site, including Fentanyl. And, they use bitcoins and other untraceable financial capabilities, and it is a big problem.”
Since then, the White House press secretary Sarah Sanders has said bitcoin is being monitored.
“The [bitcoin situation] is something that is being monitored by our team – Homeland security is involved,” said Sanders. “I know it’s something that [Trump]’s keeping an eye on. And we’ll keep you posted when we have anything further on it.”
However, Trump’s top economic adviser, the National Economic Council director, Gary Cohn, was asked about his opinion on bitcoin in an interview by CNBC and simply shrugged.
“I’m going to leave that to you.”
Will bitcoin be taxed in the US?
Under the new Republican tax plan, there could be some tax breaks closed for cryptocurrency traders.
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Bloomberg reported that there could be limits imposed to bar crypto traders from deferring capital gains taxes when trading one type of virtual currency to another, say from bitcoin to ether.
A tax attorney at Goodwin Procter LLP, Kelsey Lemaster, told the publication:
“Every time you trade one digital currency for another, one token for another, it’s going to be taxable event.”
The changes came into effect at the start of 2018. Now, any exchanges of digital currencies are going to be subject to tax.