This is a complex issue with valid arguments on both sides. Some argue that cryptocurrency should be taxed because it is a form of property or income and should be subject to the same rules as other forms of property or income. Others argue that taxing cryptocurrency would stifle innovation and unfairly target individuals and businesses who use it. Ultimately, the decision on whether or not to tax cryptocurrency should be based on a thorough examination of the potential effects on the economy and the rights of individuals and businesses.

The question of whether or not government should tax cryptocurrency is a matter of debate. Some argue that cryptocurrency should be taxed like any other asset or currency, while others argue that it should be treated differently due to its decentralized nature and the potential for it to be used to evade taxes. Ultimately, whether or not government should tax cryptocurrency is a decision that will likely be made by individual governments and could vary from country to country.

Almost everyone is familiar with the concept of cryptocurrency. Each day millions of people indulge in cryptocurrency in hopes of getting good revenues and profits. However, the mechanism of cryptocurrency is very complex; hence you need a lot of experience to understand the concept of cryptocurrency and how to get benefit from it—one of the most common forms of Crypto Currency, which are normally known as bitcoins.

Bitcoins were launched in the market ten years ago, and millions of people have invested in the scheme; however, there is still a lot of confusion and questions regarding the concept of bitcoins. Cryptocurrency, in general, is a very confusing topic as it is not physical money that you could see or count. Cryptocurrency is basically digital money that can provide profits if you play your cards right.

Even after the confusion regarding cryptocurrency, it has been gaining popularity for a few years. Millions of traders and investors always keep an eye on cryptocurrency. This is where a lot of investors and traders have questions regarding taxation. There is no doubt that cryptocurrency tends to provide you more feasibility regarding the taxation methods as you can easily run from taxes with the help of cryptocurrency, but the question is, should the government tax cryptocurrency?

In order to understand the taxation system and answer the questions, we need to know the types of cryptocurrency available in the market.

Types Of Cryptocurrency

Well, if you have the same question in your mind, then you are at the right place because this article will answer all your questions, so keep on scrolling.

Since cryptocurrency is a new mechanism, it is important to know the types of cryptocurrency in order to find the validity of taxation. There are multiple types of cryptocurrency within the market; however, one of the most famous cryptocurrency is known as bitcoins. This cryptocurrency is based on blockchain and is of the highest value. There are multiple ways you can invest in bitcoins; however, these are very expensive.

Bitcoins came into the market in the year 2009. Satoshi Nakamoto is a well known pseudonym who came up with the concept of bitcoins. Initially, the existence of bitcoins was a test of more than 17 million bitcoins with a market value of more than 800 billion. The fun part about these bitcoins is that the value of the Bitcoin is not stationary as there are 50 50 chances of profit and loss.

There are many different types of cryptocurrency, but some of the most popular ones include:

  1. Bitcoin: The first and most well-known cryptocurrency, created in 2009 by an unknown individual or group using the pseudonym Satoshi Nakamoto.
  2. Ethereum: A decentralized platform for building smart contracts, created in 2015 by Vitalik Buterin.
  3. Litecoin: Created in 2011 as a “lite” version of Bitcoin, with faster transaction times and lower fees.
  4. Ripple: A cryptocurrency that is focused on facilitating global money transfers, with a particular emphasis on banking institutions.
  5. Bitcoin Cash: A fork of Bitcoin that was created in 2017 in order to increase the block size limit and improve scalability.
  6. Monero: A privacy-focused cryptocurrency that is designed to be more anonymous than other cryptocurrencies.
  7. Tether: A stablecoin that is pegged to the value of a fiat currency, such as the US dollar.

These are just a few examples of the many different types of cryptocurrency that exist. New cryptocurrencies are constantly being created, and the list of types of cryptocurrency is likely to continue to grow in the future.

Is There A Necessity Of Taxation On Cryptocurrency

To answer the question, yes, Taxation is necessary for cryptocurrency as well. The reason for taxation is very clear, cryptocurrency is a form of money, and it means it has a significant effect on the economy of the country, which is why the government can impose taxation on cryptocurrency as well.  Everything from exchange and purchase of any kind of cryptocurrency is directly related to the economic graph of the state, which means the government needs to impose certain taxes in order to validate the overall economic statistics of the country or the state.

In the initial times when cryptocurrency was just launched in the market, there was no taxation whatsoever on any kind of transaction or purchase, which led to a lot of fraud cases and money laundering through cryptocurrency. This was the main reason why IRS started to tax the cryptocurrency as well. Through this taxation, your money is saved and traceable for the government in order to assure legal transactions.

Following are some reasons why Government can tax cryptocurrency:

Government Can Impose Taxes On Crypto Income.

Cryptocurrencies can be used in multiple ways on day-to-day basis. You can receive payments in the form of cryptocurrency, you can pay someone with cryptocurrency, and you can opt to have your monthly salary in cryptocurrency as well. This opens the door for millions of possibilities regarding the use of cryptocurrencies. So, according to this logic, as government imposes tax on normal salaries, it should also impose tax on salary gotten in cryptocurrency form. This will create a value of equality within normal civilians and crypto traders and will also help the state to have sufficient funds for the state’s progress and prosperity.

This also adds up to the security of the person getting the salary as taxation will help them have legal authority over cryptocurrency that has fluctuation in value, which means they can get more profit from cryptocurrency after paying the taxes.


Government Can Impose Taxes For Legal Business Transactions.

If you are a business owner that is also a crypto trader, this means that government needs to impose a tax on your cryptocurrency transactions. Businesses are very hard to manage and work on a lot of complex inventory mechanisms. This means there are high chances of fraud and theft, especially if you are dealing with cryptocurrency. This is why government imposes taxes on your legal business transactions so it can track each transaction through the taxation amount. Once you pay your taxes regarding the transaction, your business transaction is locked into the system of the government. This way, you can legalize all your transactions without any fear of getting scammed or robbed.

In case you do not pay your taxes, your business transactions would be unknown to the government, which will make your business still legal and will result in additional penalties. Suppose you are running a business that makes up revenue of 12,000 U.S. dollars and your daily customers tend to pay in cash. If you get a customer that buys a big item from your brand and they pay you an amount of 9000 U.S. dollars at once, the government is prone to investigate how and where you got the money from. However, if your transaction is in cryptocurrency, there wouldn’t be any hassle if you just paid the upper taxes.


Government can impose a tax on the market transaction.

The direct answer would be yes, and the government can easily impose tax on any kind of transaction you make your cryptocurrency. Take an example of bitcoins, and government adds bitcoins into your financial criteria as minor and major assets depending on the size of the transaction. According to the laws and regulations of the IRS, every citizen must notify the government about every transaction they make, which any kind of cryptocurrency. in case you do not want to notify the government, the government will charter a case after your name and will file for tax fraud. So in order to keep your finances, notify the government beforehand and pay your taxes.


Government Can Impose A Tax On The Blockchain And Bitcoin Miners.

A lot of online Raiders that raid bitcoins and invest in blockchain schemes need to pay taxes to the government regarding crypto mining. The taxation is imposed according to the recent price of the blockchains scheme and Bitcoin. However, you can lessen the amount of taxes by decreasing your resources while mining. This will lighten up your overall investment, and you’ll have to pay less and gain more revenue.

You need to make sure not to get caught up in the downfall of prices regarding blockchain schemes and Bitcoin prices because it will lead you to more taxation and less revenue as there are plenty of complexities of taxation already.


Governmental Complexities Regarding Taxation Of Cryptocurrency

On the current sitting, the government does tax participants of cryptocurrency; however, the whole procedure of the taxation is a bit complex. The reason for the complexity regarding the taxation of cryptocurrency is that there is no absolute value of the cryptocurrency which means that it changes regularly due to the regular change. It is hard to establish how much taxations should be put on cryptocurrency. The other thing that government can put a tax on is the transaction of cryptocurrency. However, there is also another complication as the authentication of the transaction it’s hard to establish.

According to IRS reports, digital money or cryptocurrency can easily be manipulated through various resources if taxation is not imposed. The mechanism of taxation to keep the currency worked as a decoding mechanism for the states authorities to monitor the economic growth and economic activities within the civilians of the state.

In order to create a perfect inventory for the States’ administration government has come up with accounting mechanisms that are used to predict taxes on any kind of activity regarding cryptocurrency. following order to accounting mechanisms

  1. Last in first out
  2. Highest in first out
  3. First in first out

Last In First Out

Three of these mechanisms are highly applicable to crypto currencies such as bitcoins. The last in first out mechanism was made to help the crypto investors to have a low taxation value; however, there were a few conditions that were made by IRS in order to accomplish legal and authorized invoices.

Highest In First Out

The second mechanism, known as the highest in first out, also helps the investors of cryptocurrency to trade their currency with the lowest text value but with the highest share. This mechanism provides benefits to both the trader as well as the government.

First In, First Out

The last but not least, the first in first out method is made for the new traders of cryptocurrency as it is very simple to follow; however, it does not give any kind of benefits regarding decreasing the taxation price. It also helps in investing your money into more secure resources, which directly enhances the prospect of good revenue.



To sum up, all the above-given information government can indeed tax cryptocurrency as it is also considered a form of finance. Hopefully, this article will help you understand the mechanism of taxation a little bit better. This article tackled the question of how and where the government can impose taxation upon civilians regarding cryptocurrency. However, now that you know the complexities of the crypto market, try to be aware of all these facts and figures when you go investing in cryptocurrency. Make sure to be a responsible citizen and pay your taxes according to governmental guidance. This will keep both you and your bank accounts in safe hands in the future while you can enjoy the additional revenues of cryptocurrency.


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