Cryptocurrency: Expert discusses success of Bitcoin
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After El Salvador’s congress officially classified the world’s preeminent cryptocurrency as legal tender on June 9, bitcoin pioneer Max Keiser said that a “global bitcoin standard is now emerging” around the world. Referring to the adoption of bitcoin by El Salvador, he added that, “The country’s currency is now something scarcer and harder than gold”. Now Danny Scott, the CEO of crypto exchange Coin Corner, said that El Salvador’s bitcoin move could see the cryptocurrency classified as “foreign currency” and “no capital gains tax on bitcoin in other countries” could be a result.
On June 6 Mr Scott tweeted: “So in theory, if El Salvador makes bitcoin ‘legal tender’.
“This makes it a ‘foreign currency’ and will mean no capital gains tax on bitcoin in other countries.
“This is an additional great knock-on effect.”
A follower of Mr Scott said that making bitcoin legal tender “will open a Pandora’s Box if it is recognised as a foreign currency by the International Monetary Fund”.
Foreign currency is recognised by the International Monetary Fund (IMF) as the “official means of payment” of that state.
The IMF classify “legal tender” status as an official attribute of recognising an official currency.
If bitcoin is recognised as a foreign currency because of the Salvadoran move, this could set a precedent and make it not subject to capital gains tax within the UK.
Under current UK legislation, many assets are exempt from having to pay capital gains tax.
Some of the most common examples are private motor cars, including vintage cars, gifts to UK registered charities and “foreign currency held for you own use”.
The UK Government outlines capital gains tax as a “tax on the profit when you sell or dispose of something, such an asset, that has increased in value”.
The gain that is made is taxed, not the amount of money you receive from the sale.
At present, in the US, residents and citizens selling any cryptocurrency must pay capital gains tax, because it is labelled as a taxable transaction under US law.
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However, trades between national currencies are exempt and not taxable and not subject to US tax reporting.
This means that using US dollars to buy a foreign currency, such as the pound, is not subject to a taxable transaction.
The news comes as the US Federal Reserve announced this week that inflation was rising faster than previously expected.
Jerome Powell, 16th chair of the Federal Reserve, raised Fed’s headline inflation expectation to 3.4 percent.
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