How Is Cryptocurrency Taxed?

Taxation is an integral part of every economy. Whether the nation is developing, developed, or under-developed, every economy depends on taxes for better revenue. Generally, taxes are levied on several monetary transactions; however, nowadays, cryptocurrency is also becoming a part of taxation.


The entire world is witnessing the tremendous growth and popularity of cryptocurrency, and thus; as a result, the crypto market is setting new records. Other than the whole nation, the IRS, i.e. Internal Revenue Service is also watching cryptocurrency. Hence, if an individual transacts crypto, and ecn trading they probably fall under the taxation category.

Understanding Cryptocurrency

Before taxation, it is essential to understand the concept of cryptocurrency entirely. In layman’s terms, cryptocurrency is a digital currency used as a medium of exchange. Furthermore, the exciting feature is this currency is primarily decentralized and is not controlled by any regulatory authority. Cryptocurrency significantly depends on blockchain technology for optimum and smooth functioning.

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Cryptocurrency And Taxation

In many nations, cryptocurrency is considered a digital asset. Thus, the IRS treats crypto like bonds, stocks, and different capital assets. The Internal Revenue Service taxes the cryptocurrency like these financial components are taxed. However, the only condition is getting details like where an individual got cryptocurrency and how long they will keep it. The transactions are also categorized into two parts: taxable and non-taxable transactions. Following is a complete detail:

Taxable Transactions: The transactions that lead to tax generation are taxable transactions. Following are the examples of some of the transactions:

1. Trading Crypto For Cash: When individuals sell crypto for cash or any currency, they owe tax to the government. If individuals sell crypto and forex trading for more than the cost price, they are more likely to invite taxes.

2. Conversion: If an individual uses bitcoin to buy ether or any other cryptic digital currency, technically, the bitcoin is sold. Hence, when a selling transaction is carried out, the individuals are required to pay taxes.

3. Using Cryptocurrency For Commodities And Services: When individuals use bitcoin to buy any commodity, say pizza or any toy, they are most likely to invite taxation liability. From the IRS standpoint, crypto spending is not much different from selling crypto. Furthermore, as per the rules and regulations, an individual is required to sell crypto first to use it as a medium of exchange for buying goods and services.

Whenever the price of cryptocurrency is rallying, people start spending a lot more.

– Erik Voorhees

Non-Taxable Transactions: The transactions that don’t cause any taxation liability upon crypto holders are called non-taxable transactions. Following are some the examples of non-taxable transactions:

1. Cash Purchase Of Crypto: When an individual buys crypto and holds it for a long time, such a transaction is not taxable. Taxation occurs when an individual uses it for selling or spending on commodities.

2. Gifts: Receiving cryptocurrency as a gift is not a taxable transaction. For transactions to be taxable, individuals need to incur taxable transactions.

3. Giving Gift: Apart from receiving cryptocurrency, individuals who offer other people crypto as a gift are also exempted from taxes. $15000 is an exempted limit via which individuals can send crypto as a gift to other people.

4. Transfer: When the cryptocurrency is transferred to the self, the particular transaction is not regarded as a taxable transaction.


Therefore, in a nutshell, it is fitting to mention that individuals must have complete knowledge while transacting cryptocurrency. Other than this, it is also essential that individuals must know the difference between taxable and non-taxable transactions while dealing in cryptocurrency. Furthermore, crypto is treated as a taxable commodity because many people consider it a profitable investment and decide to keep it with themselves. Additionally, the IRS was also unable to get more revenue from individuals that used to deal in cryptocurrency.

What Is Blockchain? The Technology Behind Cryptocurrency, Explained

Blockchain and Technology Behind Cryptocurrency

One of the most talked-about inventions is the blockchain technology of the twenty-first century. Blockchains, which were initially created to support bitcoin, now power dozens more cryptocurrency traders, and forex broker developers are seeking to integrate the technology into industries such as medicine, art, and banking.


Understanding how blockchain works, why it has value, and how it differs from other internet technologies might assist in grasping the growing interest.


A blockchain is a digital record that is impossible to hack or manipulate and keeps track of transactions through a network of computers. Individuals can conduct secure transactions with one another without the assistance of a government, bank, or other third parties. Cryptography links the expanding list of records, known as blocks. Each transaction is independently verified, time-stamped, and added to a growing data chain. Once it is recorded, the information cannot be changed.

Blockchain technology could benefit from contracts for legal services, real estate sales, medical records, and any other industry authorising and recording a series of events or transactions.

How It works

So this is how blockchain works, using the cryptocurrency market as high leverage trading.

  1. Bitcoin transactions are entered and disseminated by a network of solid computers known as nodes.
  2. This global network of thousands of nodes was created using computer algorithms to confirm the transaction. For their work, the miner that accomplishes a new block first is awarded bitcoin. These fees comprise newly created bitcoin and network fees passed on to the buyer and seller. Depending on the number of transactions, the prices may increase or decrease.
  3. The transaction is recorded in a distributed ledger block after being cryptographically confirmed. The transaction must then be approved by the majority of the network.
  4. When a block is irreversibly connected to all previous blocks of bitcoin transactions utilising a cryptographic fingerprint called a hash, the transaction is completed.

Blockchain Technology: The pros of using blockchain technology for bitcoin is discussed below:


Any government or agency will no longer decide a public blockchain’s fate. By removing the fees connected with third-party transactions, the lack of intermediaries reduces expenses. Another advantage of blockchain is its speed: unlike banks and other intermediaries, blockchain is available 24 hours a day, 365 days a year.

If the cryptocurrency market overall or a digital asset is solving a problem, it’s going to drive some value.

–  Brad Garlinghouse

Transparency Combined With Anonymity

The bitcoin blockchain stores all transactions on systems worldwide. Since the address and transaction records of bitcoin wallets, which hold the cryptocurrency market, are publicly available, transactions are transparent. The owners of each wallet linked to those public addresses, on the other hand, remain anonymous, and their identities are not revealed.

Precision And Safety

The network nodes of this technology must approve and log each transaction, making data manipulation and alteration extremely difficult. Because there is little human interaction in the trade, there is a lower danger of error. It also prevents someone from spending bitcoin more than once.

Great Opportunities For Underbanked

Digital currencies based on the blockchain protocol enable the transportation and storage of money without the involvement of unscrupulous third parties in countries and areas where financial institutions are weak or corrupt.

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Blockchain Applications, Both Public And Private

  • Blockchain technology has the potential to bring benefits that transcend beyond digital currency. Many corporate applications may be built on private blockchain networks, which allow enterprises to regulate who enters:
  • Many organisations now offer private network solutions to trace product supply chains more effectively based on blockchain technology. Companies can, for example, utilise the technology to determine where recalled food products were shipped and sold swiftly.
  • Companies have claimed that a statewide blockchain network for electronic medical information “could increase efficiencies and facilitate better patient health outcomes.”
  • Smart contracts: Contract terms can be automatically altered or updated if a set of circumstances is met.
  • Some developers are working on blockchain technology that could be used in elections.

Property Sales

Blockchain technology can be used to sell a variety of assets, including real estate, automobiles, and investment portfolios.


Whereas bitcoin is perhaps the most well-known application, there are other applications of blockchain technology as well. It is only one of several cryptocurrencies. While it is unclear if bitcoin will succeed in eliminating various established payment methods, the uses of blockchain technology are constantly developing, and proponents hope they will result in significant changes across industries.