Crypto Legal Tender and Taxing Are Welcome for Mass Adoption
There is so much cryptocurrency adoption news in the world now. First, El Salvador adopted Bitcoin as a legal tender a couple of years ago.
The St. Kitts government announced in the recently held BitcoinCash 2022 conference that they will accept BitcoinCash or BCH as a legal tender since March 2023.
I read another story: the Indian government has given a green signal to experiment with such digital currencies with a few select banks in 2023. The Indian national bank, the Reserve Bank of India, has already been carrying out its cryptocurrency research projects.
With all its problems, the crypto world is floating high in the rough current of governmental crypto regulations. Although in most countries, there is no well-structured crypto regulatory law.
Excepting a very few locations, cryptocurrency income is taxable. That means income tax on cryptocurrency earnings is in effect.
Taxing can come when citizens convert cryptocurrencies into fiat and vice versa.
Governmental central regulatory platforms track fiat banking transactions connected with cryptocurrencies and can deduct income tax at source.
And the tax rate is the same as the respective national tax rates. In some nations, the tax on cryptocurrency earnings is fixed at a higher rate.
The recent legal battles between the US Securities and Exchange Commission and LBRY Foundation, Ripple Labs, etc. send a very strong warning to the entire cryptocurrency domain in the planet.
In principle, and by the design of distributed ledger technologies, most cryptocurrency transactions remain anonymous and are decentralized "peer-to-peer" without any central authority to track or control.
I am forced to comment that way because some cryptocurrency transactions, such as the lightning network with Bitcoin, are quasi-centralized.
Also, all centralized crypto exchanges got detailed information about their users. They are bound to disclose all crypto records and addresses to the respective government regulatory boards.
Crypto to fiat conversion is a process where the government gets to know about cryptocurrency income. The centralized crypto exchanges may also deliver information to the government regulatory departments.
When a national government accepts a specific cryptocurrency as legal tender, that particular cryptocurrency would likely be undertaken into the income taxing system of that government.
El Salvador and St Kitts are examples of governments recognizing Bitcoin and BitcoinCash as legal tenders. St. Kitts will make BCH a legal cryptocurrency after March 2023.
When a non-custodial crypto wallet called Zapit develops a mobile app to integrate Zapit wallet with the Indian government's mobile SIM number-based Universal Payment Interface (UPI).
The Zapit wallet enables on-the-fly conversion of BCH-to-INR and makes payments from its BCH wallet. The conversion of BCH to fiat may likely incur a flat-rate income tax deduction by the Indian income taxing system.
In spite of the regulatory income tax deduction, I would say that these steps of legalizing cryptocurrencies and using them in association with the governmental payment interfaces, such as Zapit-UPI integration, are the most welcome developments in the crypto arena.
Cryptocurrency is decentralized digital money with the provision of peer-to-peer payments without recourse to any central authority.
Since governments worldwide are trying hard to restrict cryptocurrency activities through legal suits and new taxing laws, cryptocurrency projects are also trying to establish dialogues with some governments to make their cryptocurrencies legal tender in those territories.
El Salvador and St. Kitts are the two nations that have taken positive steps to make Bitcoin and BitcoinCash, respectively, their legal tenders.
The Zapit crypto wallet developed an app to integrate Zapit BCH wallet with India's UPI app for on-the-fly BCH-to-INR conversion plus payment possible.
Although these developments may miss the spirit of freedom and privacy of cryptocurrencies and may invite government taxation, these are the most welcome steps towards cryptocurrency adoption by the common mass.
Our loving community of bloggers is not happy to admit that legalizing cryptocurrencies is most likely inviting government control over deducting income tax on crypto income!
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Dec 01, 2022