Cryptocurrency is a rising trend in trading. While initially marketed as a digital form of currency, people are more interested in trading them rather than spending them on goods and services. It can be bought with real money, and can also be sold for real money. Comparisons have been made to in-game currencies, which is a good way to get a basic understanding of cryptocurrency. There is, however, one big difference between them.
Cryptocurrencies can be and are being taxed, while in-game currencies, such as WoW gold, are not. To explain why let’s compare in-game currency and cryptocurrency first.
They are both digital forms of currency that can be traded and used to obtain goods or services. Both can be bought with real-world money (in a bit of a roundabout way for WoW through tokens or through secondary markets). The reverse can also be done for both (through the aforementioned secondary markets for the case of in-game currency).
They are also stored similarly, with each player or owner having digital ‘wallets’ specific to their account or characters. How they are used have different methods however
In-game currency has a more instantaneous effect. When you buy something from an NPC shop, the gold (or whatever the game named the currency) is spent and you receive the item or service that was paid for. When you trade gold with another player, as soon as the trade is confirmed, they receive the gold. There are some ways to get back your gold after spending it, such as a buyback option in some games (at times, it is not the whole amount though) or selling the item in a server-wide market.
Cryptocurrencies, however, have a delay in the transactions. A miner must verify the parties involved, as well as the currency being traded or used. The process may take a handful of seconds depending on your internet speed. There is also the permanence of the blockchain-based database of transactions that are used in most of these currencies. Once a transaction has been verified and added to the chain, it can never be deleted or modified. Generally, the purchase cannot be refunded once the transaction is complete.
The main difference between them, though, is that the American government recognizes cryptocurrency as a commodity or property.
Cryptocurrency as Property
This perspective only on the American government’s side as of right now, as Japan seems to see it as a real form of currency. Because of this point of view, certain rules and regulations have to be applied to cryptocurrency, which includes tax. Transactions involving things that will be taxed are converting crypto to fiat, trading crypto for crypto, and spending them for goods and services. Transactions that will not be taxed are giving crypto as a gift, or transferring them from wallet to wallet.
Basically, the USA is treating it as a property for tax purposes. For now, the idea is still very … Read More...