Tax and legal aspects of cryptocurrency
Assalamu Alaikum
Although cryptocurrency was once out of control, most countries in the world are now bringing it under tax and legal frameworks. As easy as it is to profit by investing in cryptocurrency, it is equally important to understand its legal ramifications.
In most countries, cryptocurrency is not considered a 'currency', but rather an 'asset/property'. As a result, two main types of taxes may apply to it. Capital gains tax is the most common tax. When you buy a cryptocurrency at a low price and sell it at a high price, you have to pay this tax on the profit you make.
- Short-term: If you hold it for less than 1 year and sell it.
- Long-term: If you hold it for more than 1 year and sell it (in many countries, the tax rate is lower in the long term).
Income Tax Crypto earnings are directly treated as 'income' in the following areas and are taxed according to your personal income tax slab. Tokens received from airdrops or mining or rewards received from mining. If a company pays you a salary in crypto. Dividends or interest received by locking up crypto.
The legal status of crypto varies across countries. In developed countries (US, UK, Europe), buying and selling crypto is completely legal but very tightly regulated. Exchanges are required to submit customer transaction information to the government. India has imposed a 30% flat tax on profits from crypto and 1% TDS on each transaction. This is one of the strictest crypto tax regimes in the world. Countries like Portugal, Dubai (UAE), and the Bahamas are havens for crypto investors. There is often no tax on personal investment profits here.
The position of cryptocurrency in Bangladesh is somewhat complex and cautious. Bangladesh Bank has issued public notices several times stating that cryptocurrency is not a legal currency. Transactions through it can be a punishable offense under the 'Foreign Exchange Control Act' and the 'Prevention of Money Laundering Act'. Sending or buying money on crypto exchanges using any bank or card in Bangladesh is prohibited. Although direct buying and selling is prohibited, it is used by freelancers or technology enthusiasts. However, it has not yet received any legal recognition and there is a risk of major legal complications if caught.
Although cryptocurrency seems anonymous, the government can now easily track large transactions through blockchain analytics tools. Tax evasion can lead to the following problems. Hiding profit information can lead to heavy fines and legal punishment. Banks or exchanges can close your account for life due to suspicious transactions. If you cannot show the proper source, your acquired wealth may be declared illegal.
If you live in a country where crypto is legal or taxable, you should take the following steps. Keep a record of the date of each transaction, the purchase and sale price, and the fees. You can easily prepare your tax reports using tools like Koinly or CoinTracker. If you have a large investment, consult a tax lawyer.
Taxes and laws are a big part of achieving financial freedom from cryptocurrency. By following the law, not only will your assets be safe, but you will also not have to worry about getting into any legal complications in the future. Today's discussion concludes here. I hope you've found it interesting. Please share your thoughts on today's topic. Prayers for everyone. May everyone be well. Amen.
I’ve always loved sharing my passions with you — from crypto and movie reviews to photography, storytelling, and blogging. Now, continuing that creative journey, I’ve stepped into a brand-new world — Gaming ! 🎮 | 🎥 On my YouTube channel Bokhtiar The Survivor — I’m consistently working to bring you the raw thrill of my gaming experiences — the emotions, the excitement, and those unforgettable moments that make every game feel alive.
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