Is the future of Bitcoin in question
BITCOIN: AN INNOVATIVE WAY OF INVESTMENT
Bitcoin is a digital currency that was created in 2009. Marketplaces called “bitcoin exchanges” allow us to buy or sell bitcoins in multiple currencies.
Bitcoin is a new currency created in 2009 by an unidentified individual using the alias Satoshi Nakamoto. Activities are processed with no intermediaries – that is, no banks! Bitcoin can be used to book hotels on Expedia, to shop for overstock furniture, and to buy Xbox games.
But a lot of the hype is about getting rich by trading. Bitcoin’s price rose to thousands in 2017.
Bitcoin is basically a file stored in a digital wallet that can be operated with a system that can be a smartphone or a computer. It is not like the normal trading of securities. The main crux is that people send and receive bitcoins from other people and there is no governing or regulatory body to monitor the transaction.
But instead of having a regulatory body, they have a public list called blockchain, wherein every transaction between people across the world is recorded and therefore, there is full authentication of transactions.
What’s the blockchain?
A blockchain is a decentralized directory of all transactions across a peer-to-peer network. With this innovation, participants can confirm transactions without the need for a central clearing authority. Possible applications may include the transfer of funds, settlement of transactions, voting, and many other issues.
Bitcoin is in the headlines again. Several other cryptocurrency proponents contend that its price is rising even though bitcoin is challenging gold’s standing as a super-currency asset to own when fiat currencies are being debased.
Is bitcoin offering things unique as an evolving store of value, blending some of the benefits of technology and gold? Chi Lo, Senior Economist for Greater Chin
What’s the major issue with cryptocurrency (bitcoin)?
a gives his interpretation.
- Bitcoin is not a store of Value
- Bitcoin is not Money
- Fixed Supply is a problem, not necessarily a benefit
- Bitcoin is a Vehicle for Speculators
Bitcoin Anonymity :
Although every bitcoin data is confirmed in a public log, the identities of sellers and buyers aren’t ever revealed – only their wallet IDs. While this needs to keep the transactions of Bitcoin users private, it also lets them buy or sell this without easily tracing it back to them.
That’s why it’s become the currency of option for consumers trafficking guns or other illicit activities online.
How to identify the parties in a Bitcoin transaction:
In addition to being able to transact using Bitcoin, neither the sender nor the receiver is needed to assess themselves or provide any other private information.
However, numerous transactions contain some clues that might help to identify the involved parties. Among the clues are the quantities of bitcoin transacted, the timestamps, and the IP address of the sender. In addition, coins used in a transaction may be “tainted” or associated with the recognized Bitcoin addresses of the user.
To identify Bitcoin users, these clues will be combined with additional information that could be provided by Internet Service Providers (ISPs), Bitcoin Exchanges, Bitcoin Web Wallets, Bitcoin Device Spyware & Bitcoiners themselves.
Retaining anonymity in Bitcoin transactions
Cryptocurrency coiners can simply remain anonymous all through their transactions by using some good privacy practices of Bitcoin. These methodologies will help stop other individuals or groups from obtaining additional details that might reveal their identity.
Some of the suggested techniques are Bitcoin services that make sure that Bitcoin users remain anonymous during and after transactions, use a virtual private network (free or paid), and use a new address for each transaction.
Those certain tips involve setting up strong privacy and security settings on your apps and devices, using an operating system with good cryptographic protocols such as Linux, & maintain an antivirus up to date to prevent new spyware from changing destination wallets to prevent malware.
GLOBAL ACKNOWLEDGMENT TO BITCOIN
Bitcoin is the most prominent and comfortable means of virtual currency across the globe. Being given the legal status of currency, Bitcoin holds the same value as real tangible currency holds. One can change Bitcoin into Euro, Australian dollars, US dollars, and even into another virtual currency.
Such exchange or payment transactions are made online, anonymously and the same is stored as digital currency in hard drives. As discussed earlier, Bitcoin is an unregulated currency i.e., they are not regulated and monitored by any government authority.
Status of Bitcoin across the globe are –
THE UNITED STATES
The United States IRS services Bitcoin or any other virtual currency as being property. Thus, any transactions that use Bitcoin will be taxed in the same way as property. This means, that every transaction involving Bitcoin be reported to the IRS for taxation purposes.
Such a reporting be made by any US taxpayer, who sell the goods in receipt of Bitcoins. Such a person is also required to pay Crypto tax and file the same in the annual tax return.
The value of Bitcoin for any transaction be as the fair market value of Bitcoin as on the date when the currency was received by the taxpayer. In case the date of the transaction is not known or not possible to be found out, the market value is taken, when the currency is exchanged.
In the case of a business having assets in the form of virtual currency then the taxpayer should consider the taxable gains or losses.
A taxable gain arises when the USD market value in relation to Bitcoin is greater than the book value of the currency, while loss is incurred when the market value is lower than the basis of the currency.
In the case of Bitcoin mining, the person shall be subject to US taxation. Also, any wages paid to any worker in virtual currency, including Bitcoin are subject to tax withholding and social security. Taxpayers are thus recommended to completely understand the taxation of virtual currency within their region to avoid penalties.
The countries under the European Union are independent to tax Bitcoin. The purchase and sale of Bitcoin do not incur any VAT but are charges with other taxes applicable in the respective country in which transactions are undertaken.
In 2015, the European Court of Justice ruled that any transactions that include Bitcoin as a mode of payment are exempt from value-added tax (VAT). According to the Court of Justice, Bitcoin is listed as being a currency and it is not property and is therefore given the status of legal tender.
The UK government looks at Bitcoin as a foreign currency. Thus, the tax provisions that apply to losses and gains on foreign business thereby, apply to Bitcoin transactions. Speculative transactions may not be subject to tax.
Even though the speculative transactions are not subject to any tax, still the government is not having a hard and fast rule to determining the tax liability. Taxation would depend upon the type of transactions and the individual.
Since 2013, Germany considers Bitcoin as a source of private income and investment. The same is subject to a tax @25% on the profits realized, but this rate is applicable only if the profits are made within a year from the receipt of Bitcoin.
It means that in case the taxpayer holds the Bitcoin for a period of at least 1 year, the profits arising from such Bitcoin will not be subject to any tax. Thus, Germany treats Bitcoin just as shares or stocks.
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Japan recognizes Bitcoin as one of the modes of payment. The sale of Bitcoin is completely exempt from consumption tax from 2017 and is considered as the assets of the holder. This means that they can be freely transferred digitally to any other person without any compliance and regulation.
Being a personal asset, the profits arising from the trade of Bitcoin are considered as business income and are treated in accordance with capital gains for tax purposes.
Australia sees virtual currency as a mode of barter currency, meaning that it can be exchanged only for other virtual currencies only. Australian tax authorities consider Bitcoin as an asset that can be used for capital gains.
Businesses undertaking any kind of transaction by using Bitcoin should record and date the transaction, communicate the same to AUD, and declare the income from such transactions as ordinary income.
In case Bitcoin is used for transaction-related to personal purposes in the form of buying goods or services or if the value of any transaction involving Bitcoin is less than AUD 10000, then such transactions are exempt from tax.
Also, if the Bitcoin is held for investment purposes, then the investor is required to pay taxes on the gains. And in case of mining or exchange of Bitcoin as a business, or for business purposes, then this would be considered as stock trading and would be taxed.
With such differential treatment of Bitcoin across the world, the role of Indian Experts becomes more important and vital, since they are having complete knowledge related to the treatment and taxation of Bitcoin or any other virtual currency in other countries.
Without their expertise and knowledge, it becomes difficult to identify the taxation of an individual under different countries and as per their treatment of such currencies in their economy.
The future of Bitcoin in question?
No one knows what’s going to become of bitcoin. This is most highly regulated, however, some countries, such as Japan, China, and Australia, have begun to apply to go to weigh regulations. Government agencies are worried about taxes and their lack of control over the currency.