With the fussy mania of Bitcoin going around and past, your eyes and ears, in the news and peer discussions, you must be having some basic questions about it: What is bitcoin? Is it legal? How can I get it? But most of all, you must be thinking, ‘Is investing in Bitcoin safe?’
Bitcoin is the first ever cryptocurrency that existed, it was invented in 2009 by Satoshi Nakamoto.
Cryptocurrencies are nothing but computer codes that have monetary value. No Government has any control over them.
Bitcoins ‘self-contain’ their value i.e. there’s no need for any bank to move or store the money.
Bitcoin currency is completely unregulated and decentralized.
Bitcoins are mined, and they can be mined by anyone in the general public who has a strong computer. However, only 21 billion of bitcoins in total can be mined. Currently, there are around 11 million in circulation.
Bitcoin has no underlying physical monetary base to support its value, and it is totally subject to its demand in the market.
What are the risks?
Low demand: India has not legitimized bitcoin, hence investment returns are totally based on demand i.e. you get your return only if there is another buyer in the market who is ready to pay you more for it. Currently, the high-value of the digital currency owes to its high demand, but once people start selling, there is a possibility that rates will drastically fall.
Unregulated: There is no bank or government tax agency that can track your money and its movement. Hence, it can become a tool for money laundering.
Irreversible transactions: There is no insurance protection of your bitcoin wallet i.e. if you lose your wallet’s hard drive data or even your password, your wallet’s content is gone forever.
Finance minister Arun Jaitley highlighted in a statement that cryptocurrencies are not legal tender and have no regulatory permission or protection in the country.
However, there was no announcement banning or imposing any curbs on the same. The government panel is also awaiting a report on tackling cryptocurrencies in India, Jaitley said.
The government has recently cautioned investors to be wary of virtual currencies like bitcoin, saying they are like Ponzi schemes with no legal tender and protection.
“One of the features of cryptocurrency is that there is lack of dependence on the state. It functions with a degree of anonymity. It operates within a virtual community which is created and enjoys the trust of that virtual community,” Finance Minister Arun Jaitley told the Rajya Sabha.
“The government is examining the matter. A Committee under the chairmanship of the Economic Affairs Department Secretary is deliberating over all issues related to cryptocurrencies to propose specific actions to be taken… Instead of taking any knee-jerk action, let’s wait for the report of this committee.” Jaitley added
After a legal battle in the US, instant messaging app Telegram has finally decided to withdraw its cryptocurrency-focused subsidiary, Telegram Open Network (TON).
Making the announcement in his channel on Tuesday, Telegram Founder and CEO Pavel Durov said that “a US court stopped TON from happening”.
The TON project was similar to Facebook’s Libra project which is also facing scrutiny from regulators around the world.
“Telegram’s active involvement with TON is over,” he said, while cautioning people not to trust sites using his name or the Telegram brand or the “TON” abbreviation to promote their projects.
Telegram engineers had been working on the blockchain platform called TON and a cryptocurrency they were going to name Gram for the past two-and-a-half years.
But the project also faced scrutiny from the US Securities and Exchange Commission (SEC).
The SEC in an order last October asked Telegram to stop sales of its Gram cryptocurrency following the company’s failure to register an early sale of $1.7 billion in tokens prior to launching the network, The Verge reported on Tuesday.
The Telegram Founder slammed the decision in his announcement to withdraw TON.
“Perhaps even more paradoxically, the US court declared that Grams couldn’t be distributed not only in the United States, but globally,” he said.
“Why? Because, it said, a US citizen might find some way of accessing the TON platform after it launched. So, to prevent this, Grams shouldn’t be allowed to be distributed anywhere in the world — even if every other country on the planet seemed to be perfectly fine with TON,” he said.
Durov urged others to keep fighting for decentralisation, balance and equality in the world.
Hit by regulators and political pressure, Facebook is reportedly planning to now offer digital versions of government-backed currencies, including the US dollar and the euro, apart from the cryptocurrency Libra.
According to a report in The Information on Tuesday, the social networking giant would also delay the roll out of its digital currency by several months.
According to the report, Facebook Calibra wallet, originally slated to launch this summer, is now coming out in October.
The crypto wallet will also support other major currencies apart from Libra.
Facebook, however, denied the report that earlier stated that Calibra wallet will not offer Libra.
“Reporting that Facebook does not intend to offer the Libra currency in its Calibra wallet is entirely incorrect. Facebook remains fully committed to the project,” a Facebook spokesperson told The Verge.
Several US senators have opposed Facebook’s digital coin, arguing that the social networking giant has been irresponsible with user data privacy. They have even called the digital cryptocurrency Libra “delusional” and “dangerous”.
Facebook CEO Mark Zuckerberg testified before the Congress last October about Libra, defending the idea, but acknowledging the struggles left to overcome.
The Libra Association last year said that that over 1,500 entities indicated interest in joining the Libra project effort since the project was announced on June 18, 2019.
Facebook and 20 partner organisations formally joined the digital currency project during a meeting in Geneva in October.
The current state of taxation on cryptocurrencies-
One of the biggest hurdles while trading in cryptocurrencies is the calculation of taxes also known as Crypto Tax of the investments and returns. Most people despise the idea of filing their regular taxes. The idea of filing taxes for cryptocurrencies is generally met with more frustration and annoyance.
Moreover, cryptocurrency tax rules vary with each country. Several countries have a severe lack of ground rules and regulations surrounding cryptocurrency taxation. Dealing with cryptocurrencies is undoubtedly much more difficult in such countries in comparison to those countries with set regulations. The general population’s confusion around cryptocurrencies is entirely understandable.
Despite this, people across the world are getting themselves involved with cryptocurrencies at varying degrees. People have come to realize that they can learn the fundamentals of this payment system and using a crypto tax calculator to file and report their taxes.
The need for a crypto tax calculator
A crypto tax calculator is an invaluable tool that automates and speeds up the process of calculating taxes and yields accurate results. Whether you are an enthusiastic amateur trader with a few bitcoins under your belt or you are a seasoned cryptocurrency day trader, the tools mentioned in this article are bound to help you.
Since the inception of cryptocurrencies in 2009 spearheaded by Bitcoin, a significant number of quality crypto tax calculators have been come up to make the crypto taxpayer’s job easier. While there are countless crypto tax calculators, we will mention a few of them that you can choose from to take care of your crypto taxes.
Concern over risks that come with cryptocurrencies-
Given the volatility and complexity of cryptocurrencies, people have become apprehensive, albeit curious about the value and role of cryptocurrencies in the digital age. While most people understand the fact that cryptocurrencies are secure, they realize that they are also prone to loss and theft. No central authority or external influence can control cryptocurrency transactions. It is possible to trace transactions but impossible to track the accounts back to their respective real-world identities.
The top crypto tax calculators-
Koinly is one of the most popular crypto tax calculators in recent times. It has its Headquarters in London. Owing to the sleek and intuitive UI, it is perfect for regular traders and amateur crypto enthusiasts alike.
Another point in Koinly’s favor is that a new user can start using it for free and pay when the final reports are to be generated. In addition to this, it officially supports the tax systems of over 100 countries, 33 exchanges, and six blockchains. It also has several notable features that include a portfolio tracker.
Koinly seems to have the edge over most crypto tax calculators as they develop their tax reports in partnership with audit consultants from KPMG. Hence, they are legally compliant. Their reports also support all the primary accounting methods, including the ACB (Average Cost Basis) and FIFO (First in First out) method.
CoinTracking analyzes your transactions and generates real-time reports on various things like profit and loss, the value of your Bitcoins, realized and unrealized gains, and reports for taxes.
Cointracking seems to be an all-in-one solution for your cryptocurrency taxation and portfolio tracking requirements.
It is also compatible with some third-party crypto tax calculators and software like TurboTax. Of course, this depends on the country out of which you are based.
Bitcoin.Tax is known as one of the oldest crypto tax calculators. As a result, it is a highly trusted crypto tax calculator among long-time crypto investors and crypto enthusiasts.
The downside to this crypto tax calculator is that it looks dated compared to its competitors like Koinly and Cointracking. Just like Cointracking, Bitcoin.Tax has also partnered with TurboTax to support the seamless importing of cryptocurrency tax data into mainstream income tax reports.Bitcoin.Tax seems to suit old-school accountants owing to their not so clean interface and the presence of a large amount of text.
It is likely to be the one for you if you are looking for a traditional crypto tax software.
BearTax is similar to Coinbase due to its simple UI and design language.
Their key selling points seem to be the diversity of features, options in pricing, and functionality.
Like all other crypto tax calculators mentioned, BearTax supports the important exchanges and cryptocurrencies. However, It should be said that BearTax could do very well with a few more intuitive features like a performance tracker.
Zenledger is another quality crypto tax calculator. Users can import cryptocurrency transactions and calculate their capital gains and crypto-related income.
The transaction history is imported, following which the tool generates all the crypto tax-related entities such as capital gains, income, donations, closing reports, and profit and loss statements.
As Blockchain technology continues to spread, we will witness the increase in the number of crypto tax calculators. However, a crypto trader must understand the fundamentals of cryptocurrencies to make the best use of crypto tax calculators. In order to take care of your crypto taxes seamlessly, you ought to spend some time searching for the crypto tax calculator that is right for you.