Difference of Bitcoin from Standard Currencies and How is Bitcoin taxed?

Decentralisation

Every currency in the world, apart from cryptocurrencies, is governed by some kind of authority. Every transaction goes through a bank, where people are charged enormous fees, and it normally takes a long time for money to reach the recipient.

Bitcoin, on the other hand, is not controlled by anyone. It’s a decentralised network and it’s built on the cooperation and communication of all the people taking part in it. Because of that, even if some part of the network goes offline, transactions will still be coming through.

It can’t be counterfeited

Bitcoin was designed as a currency that can withstand counterfeiting attempts. The legitimacy of BTC is ensured by the Blockchain technology, as well as by various different defence mechanisms built into every algorithm.

Most other traditional currencies are extremely prone to counterfeiting and those who control them seem to be doing close to nothing to fix it.

Durability

Bitcoins don’t exist in physical form, which means they cannot be damaged. Every single Bitcoin is essentially eternal, unlike paper money or coins.

Once sent, cryptocurrencies can’t be recalled

If someone makes a mistake and sends money to the wrong wallet and wishes to get it back, they can’t. Like many other Bitcoin features, this was done in order to prevent fraud. Unfortunately, when it comes to traditional currencies, most transactions can be recalled, all it takes is one phone call.

Fungibility

While there are some traditional currencies like the dollar and euro that are accepted in multiple countries, most of the world’s currencies can only operate within the geographical borders of their country of origin. In contrast to that, BTC is an online currency, meaning that its authorised operating environment is worldwide.

How is Bitcoin taxed?

Bitcoin is yet to obtain a legal tender status in most jurisdictions, but some tax authorities have acknowledged its significance and proposed specific regulations. Those regulations vary significantly from country to country.

For example, the U.S. Internal Revenue Service treats Bitcoin and all other prominent digital currencies as a property rather than a currency. Every taxpayer selling goods and services for Bitcoins has to include the value of the received Bitcoins in their annual tax returns. Miners are also subject to U.S. taxation, but only if the mining proves to be successful.

According to the European Court of Justice, Bitcoin is a currency, not a property. Although it is exempt from VAT, Bitcoin can still be subject to other taxes. The UK tax authorities treat Bitcoin as a foreign currency, with every BTC-related case considered on the basis of its own individual facts and circumstances. As of July 2017, the sale of Bitcoins is exempt from consumption tax in Japan, where it’s officially recognized as a payment method.

So, as Bitcoin is a relatively new currency, the regulations frameworks governing its taxation significantly differ depending on a country. Moreover, in many jurisdictions there are no specific laws or regulations regarding the cryptocurrency.

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