The US ‘’Responsible Financial Innovation Act’’ Summary 2021

  • Digital asset miners fall under the broad and unclear definition of “broker” and they are subject to Internal Revenue Service (IRS) tax reporting requirements.
  • The IRS asserts that by performing Proof of Work validation services, the fees that miners receive in virtual currency units are ordinary taxable income at the fair market value as of the date they receive the units
  • The US government has been silent on the tax treatment of staking activities that support blockchain networks or verify payments.
  • The definition of “broker” is re-defined and provides a clear definition thus taxation treatment for digital assets will be different.
  • Cryptocurrency miners defer taxes with respect to such activities until those assets are disposed of.
  • Requires more transparency and information on virtual currency transactions while implementing a de minimize rule to exclude gains or losses from cryptocurrency transactions subject to certain conditions.
  • Taxation of digital assets has not been clarified in VASP Law except that virtual asset service providers are exempted from value-added tax (VAT).
  • The General Tax Authority claimed they will regard any income derived from the vaguely defined Virtual Assets shall be considered an intangible asset and thus will be subject to related income tax, plus VAT.
  • The possibility of over-taxation issues or confusion to the VA service providers in Mongolia
  • The VASP law itself does not require VASPs to have initial, ongoing disclosure to the official body of the government, thus it is highly recommended to have a disclosure requirement to FRC or any other related official government body.

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