Ethereum’s Double jump to all-time high, updates on crypto tax developments
Ethereum hits new record high at $3143 The new all-time high price of one ether, the cryptocurrency on the Ethereum network, had become U.S. $3143 on 3 May. It has previously reached a record high at $2800 just a few days prior. For the more recent ETH holders, the past week has been quite a rollercoaster ride. Many investors ‘bought.
Ethereum hits new record high at $3143
The new all-time high price of one ether, the cryptocurrency on the Ethereum network, had become U.S. $3143 on 3 May. It has previously reached a record high at $2800 just a few days prior.
For the more recent ETH holders, the past week has been quite a rollercoaster ride. Many investors ‘bought the dip’ in the price of bitcoin and other cryptos soon after a crash following a euphoric weekend involving the stellar rise of the joke crypto Dogecoin on 16 April.
Rising to a new but temporary all-time high, ETH’s price was corrected again towards the level of the previous dip, before rallying again with a strong bullish move towards the new all-time high. For earlier ETH holders, it was just another Thursday.
Multiple investment banks support Ethereum
The latest news that may have partly driven Ethereum’s price is a good one in the eyes of long-term crypto holders. The European Investment Bank (EIB) has committed to issuing 100 million euros worth of bonds on the Ethereum blockchain itself. Goldman Sachs, Banco Sandtander, and Societe Generale are among the world’s well-known investment banks to lead the sale of the tokenized bonds.
“By helping to create a framework for a new market ecosystem, the EIB believes this will bring value-added for both issuers and investors while contributing to an innovative, efficient and secure market infrastructure,” said Bertrand de Mazières, Director General Finance at the EIB, in a press release.
Institutional adoption of crypto assets is one of the most important trust signals and price supporters in the recent era of crypto development. What many had previously thought of as a purely speculative asset, Ethereum is now becoming better known as an investment vehicle.
It is not just the ether cryptocurrency that these investment giants are interested in. Ethereum’s smart contracts enable more retail investors to have better access to their investment products, such as the EIB’s tokenized bonds.
Ether becoming more useful than just a commodity to hold
This is a small but crucial shift in the public mindset about the use case of ether, as being more than just a commodity to hold. The rise of non-fungible token (NFT) markets proves that there is actually a luxury market for digital products, where people can bid for digital artworks or memorabilia in digital form (which was previously thought to be impossible to achieve).
In a report, JPMorgan claimed that bitcoin, the world’s first cryptocurrency, is “more of a crypto commodity than currency” while comparing it with ether and that the latter is better known for being a “backbone of the crypto-native economy”, and therefore functions more like an actual currency.
Will we see Bitcoin being overshadowed by this second-generation blockchain? We’ll keep you updated on its exciting development.
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US, South Korea & Indonesia to propose new capital gains tax law on crypto
As crypto assets are becoming recognised investment vehicles and trading as an income source for many people, more so than being a speculative asset for hobbyists, governments are interested in levying tax on earnings from the crypto market.
Many countries have fewer problems dealing with the use of cryptocurrencies by malicious parties, such as for illicit transactions or for tax evasion. In such privileged countries, governments are getting ready to embrace a new digital economy that is emerging from the decentralised world.
Last week, we collected reports from three populous countries that are responsible for billions of dollars in daily crypto transactions — United States, South Korea, and Indonesia. In each country, the development of capital gains tax on the crypto market has various impacts on the market participants and the market as a whole.
In the United States, a ‘tax worry’ had caused the price of bitcoin and altcoins to pull back on Friday, 23 April. For reference, Bitcoin’s price fell to U.S. $49,824 while Ether went as low as $2140 before making a second rally that led to its new all-time high last week.
This happened amid speculation that President Joe Biden’s crypto tax proposal will take too much of a large chunk of investment profits made by holding crypto assets. The tax rate was proposed to be 20%, but the U.S. President has considered a new maximum long-term capital gains tax rate to be 39.6% for those who make over 1 million dollars in profit.
Currently, crypto investors are still expected to pay tax according to the rules set by the IRS (2020). For investors who gain income within one year of holding an asset, the tax rate is up to 37%, while the maximum tax rate for long-term capital gains is 20%.
However, observers commented that only 1% of U.S. taxpayers may be affected by Biden’s new crypto tax law, since only a handful could ever report an income of over $1 million. This includes large institutional buyers or early adopters who are sitting on more than $1 million worth of cryptocurrencies. It’s still unclear when this new tax regulation will come into effect.
Tax regulations on cryptos have never been so controversial as in South Korea, where young employees have turned to explore crypto day trading as a lucrative business. Although the South Korean governments have banned cryptocurrencies to be used as a payment method, trading is permissible under the watchful eyes of the Financial Services Commission (FSC).
However, the crypto community in South Korea is disappointed due to the government body’s lack of support for the thriving new digital industry. Ironically, South Korea is among the world’s most advanced digital economies.
Harsh criticisms of the crypto space that stem from the Bank of Korea and the FSC are not infrequent. Lee Ju-yeol, the governor of the Bank of Korea stated that the crypto bull run is “abnormal” and criticised cryptocurrencies’ extremely limited utility as an actual currency. Eun Sun-soo, the chief of FSC, added that “cryptos have no intrinsic value”.
The opinionated statements of the two chairmen can be more or less true from a philosophical standpoint, but this angered many South Koreans, who then filed online petitions to demand the FSC chief to resign his position. Over 141,000 of 200,000 signatures have been signed as of 28 April.
In the meantime, South Korea’s prime minister Kim Boo-Kyum has planned to consider very carefully the sensitive issue of taxes on cryptocurrencies, reports KBS World. The tax law was scheduled to take effect at the start of the year 2022.
Tax considerations are also taking place in Indonesia’s Commodity Futures Trade Regulatory Agency, also known as Bappebti. Similar to South Korea, the Indonesian government prohibits the use of cryptocurrencies for paying debt, although trading is permissible as much as securities and commodities trading.
The move towards regulating Indonesia’s brand new sector of the digital economy is a slow but tactical one. Currently, no tax law has been enacted to capture the USD 4.8 billion in daily transaction value, although in the past six months Bappebti has closely monitored the country’s 13 registered and regulated cryptocurrency exchanges.
For example, the KYC protocol must be followed by local exchanges. However, KYC does not apply to decentralised exchanges (DEXes), and that crypto assets can flow freely out of local exchanges to an anonymous wallet hosted by DEXes.
So far, no official statement has been released by Bappebti concerning the final figures of the tax rate nor the exact date on which the regulation will take into effect. When the bill passes, the registered exchanges will automatically levy tax deductions.
Chairman of the Indonesian Crypto Asset Traders Association, Teguh Kurniawan proposed that the tax rate should be 0.05%. For reference, the tax rate imposed on traders in the Indonesian Stock Exchange is 0.1%. He hoped that the tax rate will not be too high to push crypto investors to obtain crypto assets “through illegal channels”, which possibly refer to unregistered exchanges.
Countries where crypto assets are not (yet) taxed
According to Decrypt, here is a list of 10 countries where crypto assets are exempt from taxes as of April 2021. Please note that future updates may change this list:
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Disclaimer: Information is current as at the date of publication. This is general information only and is not intended to be advice. Crypto is volatile, carries risk and the value can go up and down. Past performance is not an indicator of future returns. Please do your own research.
Last updated October 18, 2022