Taxing Crypto: Currency or Commodity?

The world saw its first bona fide cryptocurrency in 2009 with the advent of Bitcoin. Since then, cryptos have taken the realm of fintech by storm. Its rise in popularity billowed so rapidly, in fact, that nations are unsure how to regulate it. The truth is, cryptocurrency is such a novel technology that we still don’t quite know how to handle it.

Should we consider cryptocurrencies commodities or actual currencies? The answer to this question is not so simple. In fact, tax regulations around the world differ on the interpretation.

Our current understanding of cryptocurrencies is that they can basically be either, depending on how they’re used.

Crypto as Currency

As the name itself implies, cryptocurrency can function much like fiat money. By that token, one may use them for the purchase of goods and services (in some countries, anyway). They may also be exchanged into other currencies, making them functionally the same.

So that settles it, right? After all, cryptos do everything money does, for the most part. Well, not quite. While they may operate like currency, and intuitively it makes sense, some traits make cryptos difficult to classify as currency.

For one, it is a decentralized currency. In other words, it is not tied to any third party authority (country, bank, etc.); there’s the sender and the receiver, nothing more. This stands in stark contrast to how traditional money has worked up until now.

Secondly, cryptos cannot be produced arbitrarily according to a country’s current economic state. It instead requires “mining,” and only a fixed amount of them exists. This makes cryptos more of an asset, like gold.

Crypto as Commodity

From a certain perspective, cryptos can also be considered a commodity. Granted, the line between currency and commodity is quite fine. The key difference between the two is that the former acts as a clear-cut facilitator for exchange which quantifies the value of an item or service.

That being said, a cryptocurrency does possess fungibility, i.e. the ability to be interchangeable with other commodities on the market. Beyond that, commodities can afford to be volatile, whereas currencies don’t have that luxury. Having in mind Bitcoin’s value history, it certainly fits the profile of a commodity.

This view certainly isn’t without legal precedent. In early 2019, Indonesia greenlit legislation that treats Bitcoin as a commodity for trade. Meanwhile, the Australian Tax Office (ATO) suggested the same ruling on the matter for other cryptos as well, rendering them subject to the Goods & Services Tax. Australia ultimately dubbed Bitcoin as money.

The main idea that stops cryptocurrencies from being pure commodities, however, is the idea of value. Commodities have intrinsic value, like crops, for example. Cryptos, on the other hand, hold only the value that current market expectations give them. It’s only worth what it can buy, and nothing else.

In the Eye of the Beholder…

As things currently stand, crypto seems to dip its toes in both ponds, performing as both commodity and currency. And until we reach a deeper understanding of crypto, regulation cannot consistently come to the same decision on the matter. Thus, for now, it’s up to each individual country to make up its mind about this conundrum. Until then, take a look at this insightful infographic below:

How Crypto Is Disrupting the Financial Ecosystem


Blockchain Technology And The Disruptions It Is Causing In The Financial Industry [infographic]

The cryptocurrency industry has given birth to a whole host of interesting and useful technologies. One such technology that is making a huge difference in many industries is the blockchain technology.

This type of technology facilitates online transactions and it could potentially revolutionize the way that the financial industry operates. This article and infographic look at what the blockchain technology is and how it is causing disruptions in various industries.   

What Is The Blockchain Technology?

Blockchain technology can be used as an online transaction facilitation. This technology uses a public ledger to record transactional data, and the process is sent through a peer-to-peer network. The transactions are encrypted and there are no centralized control or middlemen.

Basically, a blockchain transaction is conducted in the following way. The instigating party sends a transaction request through the peer-to-peer network. This transaction request is authenticated on the blockchain public ledger and added to it as a new block of data. This data is then passed through the peer-to-peer network to the recipient and finalized.

The following facts are some of the benefits of blockchain based transactions:

- The decentralized nature means no central control

- The lack of a middleman means lower transaction fees

- Encryption means greater security

- The peer-to-peer network means faster transactions

As you can see, blockchain offers many benefits. Generally, blockchain based transactions are faster, cheaper, and more secure than traditional online transaction methods.    

What Industries Are Already Using The Blockchain Technology?

Currently, the most widespread use of blockchain technology is the authentication of cryptocurrency transactions. This is essentially what makes cryptocurrencies possible, so any person that participates in crypto coin trades, gambles at an online Bitcoin casino or even uses Bitcoin to pay products and services is directly dependent on blockchain tech. Whilst this technology is still in its infancy, it has already progressed hugely and many industries are actually experimenting with it in some interesting ways.

Possibly one of the most interesting implementations of the technology is what the government of Sierra Leone has actually this year. It held a blockchain based elections, which created the first-ever public vote that couldn’t be refuted or disputed. Due to the blockchain public ledger, each vote is recorded and there is irrefutable proof of its creation and content.

Blockchain technology is also being used in the energy supply industry, charitable organizations, cloud technologies, and even supply chain management, to name a few examples. As this type of technology develops and becomes widely accepted, we should only see an increase in its usage.

Furthermore, we should see a greater variety of different uses for the blockchain technology. It is clear that the financial industry must pay heed to it, as it could supersede traditional online payment methods in the future.

The infographic below provides additional information about this type of technology: