Crypto Assets: Examining Possible Tax Classifications

Abstract

Crypto assets are a diverse group of digital assets with different origins and uses that have become a widely accepted part of the global financial system. As the use of crypto assets has grown, IRS guidance related to their tax classification has not changed. Although the complexity of crypto assets increases the difficulty of regulation and taxation, the SEC and CFTC have asserted their authority and obtained rulings that challenge the current IRS guidance. In this paper, we examine the complexities of, and regulatory environment for, crypto assets to provide guidance on their tax classification. Then, we discuss possible tax classifications for crypto assets and the implications of those classifications. Our analysis of the complexity of crypto assets and their regulatory environment suggests that one tax classification for crypto assets is not sufficient. Allowing for different tax classifications provides more equitable tax treatment for users of crypto assets.

Cryptocurrencies’ Impact on Accounting: Bibliometric Review

“…Offering a simple tax framework could potentially encourage taxpayers to comply with regulations. However, Angeline et al (2021) draw attention to how companies must navigate accounting standards (e.g., IFRS Foundation 2024; IFRS Foundation 2024) and relevant tax regulations to determine their tax liabilities for cryptocurrencies accurately (Davenport and Usrey 2023). Huang et al (2023) explain the specific tax implications for cryptocurrency activities in Hong Kong.…”