With cryptocurrency hype on the rise, more and more governments around the world are looking to regulate the part of the market that goes through their backyard. The latest developments show that, when it comes to governments, there are two main points of interest: regulation and taxation.
As it stands, crypto news varies dramatically from country to country. American and Chilean residents have similar problems related to crypto-related tax. On the other hand, Taiwan and South Korea are fighting against fraudulent crypto schemes. While South Africa’s Central Bank is trying to regulate the cryptocurrency market, in the Middle East, the United Arab Emirates (UAE) and Saudi Arabia are creating their own cryptocurrencies. Taiwan Semiconductor Manufacturing Company (TSMC) reported Q4 financial results that revealed the downfall of its crypto-mining chip business.
Chilean tax office: Change of mind
Chilean residents got the notice on January 17 this year that they must report their crypto-related profits to the country’s Internal Revenue Service (SII). Although last year’s declaration excluded digital currencies from VAT, SII stated that digital currency income should be considered for the calculation of annual tax. To make things easier, SII issued form 22, which is reserved for: “income from the sale of foreign currencies of legal course or assets digital/virtual, such as cryptocurrencies (for example, Bitcoins).”
Will American tax deductions remain unclaimed?
Americans, on the other hand, have the opportunity to claim a tax deduction for any losses they had in 2018.
Cryptocurrency popularity in the US was high, especially in Q4 2017 and Q1 2018. At the same time, crypto fever spread all around the world. Estimates suggest American crypto investors lost around $1.7 billion in 2018, with $5 billion in unrealized losses. That leaves a lot of space for a tax deduction. However, it seems few investors have actually claimed their deduction.
A survey conducted among more than 1,000 US residents by Credit Karma revealed interesting results. More than 50 percent said their gains or losses were too small to claim a deduction. About 30 percent said they didn’t believe they needed to file. Around 20 percent said they didn’t know how to do it.
The main problem with taxes is unclear IRS policy. Basically, when you invest in crypto (in the US), you establish a tax cost basis. A similar thing happens when you sell an asset. When it comes to cryptocurrency, things get a bit tricky. If you never sell the coins, then gains or losses are only “on paper.” This means that they cannot be subject to tax claims (except if you realize long-term capital gains after holding for more than a year).
This is one of the main points of confusion for individuals who own cryptocurrencies. Many aren’t aware that they have to sell their coins in order to trigger a taxable event. That means you cannot consider the price fluctuation of digital currency as a loss or gain if your assets remain in your possession.
South-East Asia: No frauds accepted here
After gathering evidence from June 13, the Taiwanese justice department charged seven individuals who were behind a fraudulent crypto-investment scheme. After six months of work, the justice department found enough evidence to charge the group for running an illegal Bitcoin investment scheme. One of the members attracted investors from Taiwan and China promising a 355 percent return after one year. From October 2016, this group of seven gathered around $51 million in investment.
In a less drawn-out process, South Korea sentenced the two leaders of Komid exchange to two- and three-year prison sentences for faking exchange volumes. Komid created a scheme in which they faked 5 million transactions. As a result, the leaders inflated their exchange’s volume and reportedly earned $45 million.
South Africa: Limited regulation proposed
The South African Reserve Bank (SARB) published a consultation paper on policy proposals for crypto assets a couple of days ago. The consultation paper is a joint effort with the Intergovernmental Fintech Working Group (IFWG), consisting of several South African regulatory authorities.
In this paper, SARB said regulatory action on crypto assets needs to be prioritized to protect consumers and investors. The bank’s biggest concern is that consumers “are left vulnerable as sellers of crypto assets are not regulated.”
SARB proposed something called “limited regulation”:
At this proposed level, an official body places specific requirements on providers of certain services in respect of crypto assets, without setting predefined conditions for formal authorization to provide crypto assets-related products or services.
The first step toward regulation should be the introduction of a registration scheme for crypto-asset service providers, such as exchanges and wallet providers. The registration process should be finished and implemented in the next couple of months. This plan would also oblige registered crypto entities to report suspicious transactions worth 25,000 South African rand (US$1,820) and above.
Saudi-Emirati: The cross-border digital currency
In a report by Emirates News Agency, the UAE and Saudi Arabia have announced the Saudi-Emirati Pilot cryptocurrency initiative. Although it’s still in the experimental phase, the cross-border digital currency will strictly target banks. The main goal is to better understand the implications of blockchain technology and to facilitate cross-border payments.
The virtual currency should rely on a distributed database between the central banks and the participating banks. The main goals are safeguarding customer interests, setting technology standards, and assessing cybersecurity risks. The project will also determine the impact of a central currency on monetary policies.
Taiwan: The downfall of mining chips
One of the world’s biggest producers of mining chips – Taiwan Semiconductor Manufacturing Company (TSMC) – recently published its Q4 2018 financial report. Since a big part of TSMC’s chip-making business relates to cryptocurrency mining (ASIC, GPUs), the company has seen a big drop in financial results. Almost 60 percent of Bitmain’s chip supply comes from TSMC (in 2017 and the first half of 2018). Considering the reduced demand for Bitmain’s mining equipment and worsening financial results, it’s no wonder times are tough for TSMC.
The whole process of chip manufacturing requires time to create enough volume to cover the demand. If demand declines sharply, it can cause a big inventory build-up. The problem with the volatile market is that nobody can make a realistic forecast. Of course, planning is crucial for any company looking to produce large volumes of its product.
Besides the above-mentioned chips, TSMC signed a deal with Qualcomm and started manufacturing 7nm Snapdragon chips for the ever-growing mobile industry. This helped create positive quarterly revenues, with quarter-to-quarter growth of 10.7 percent.