Developing a Regulatory Framework for the Taxation of Virtual Currencies

Abstract

This article reviews virtual currency regulations in five selected countries (Australia, Germany, the Netherlands, the United States and the Unites Kingdom), develops a methodology for creating an effective regulatory framework for the taxation of virtual currencies, and makes recommendations for the improvement of certain characteristics of the existing income tax systems that currently struggle with the enforcement of tax compliance obligations regarding transactions in virtual currencies. The author advocates the use of legislation to clarify the fundamental aspects of virtual currency transactions together with more detailed non-binding interpretative guidance that can be quickly adapted to changing circumstances. Enforcement and monitoring measures by tax authorities should not target an infinitely large number of unidentified individuals but a much smaller number of operators providing exchange services and wallet providers. A third-party reporting regime for virtual currency intermediaries should be aligned with the existing reporting obligations for anti-money laundering purposes.

The Elephant in the Dark: A New Framework for Cryptocurrency Taxation and Exchange Platform Regulation in the US

“…7 This leadership position brings with it an irony. Government agencies that are supposed to be regulating and taxing cryptocurrency economies are not certain on how to regulate crypto-economies, let alone what exactly a cryptocurrency is (Bal 2018).…”