A New Framework for Taxing Cryptocurrencies

Authors

Reuven S. Avi-Yonah, Univeristy of Michigan School of LawFollow
Mohanad Salaimi, University of Michigan School of Law

Document Type

Article

Publication Date

5-2022

Abstract

This article describes a proposal to tax cryptocurrencies based on their unique features.It argues that while various ways of earning or receiving crypto tokens (for example, mining in proof-of-work (PoW) protocols like bitcoin and staking in proof-of-stake (PoS) protocols like ether) generate taxable income, the tax results should take into account positive and negative externalities. It also claims that because of its volatility, crypto should not be taxed until tokens are exchanged for real-world items like fiat currency or goods and services. Finally, this article argues that when crypto tokens are exchanged for fiat currencies or goods and services, they should be treated as foreign currency if held for less than one year.

Comments

Reprinted with the permission of Tax Analysts.

Recommended Citation

Avi-Yonah, Reuven S. and Mohanad Salaimi. "A New Framework for Taxing Cryptocurrencies." Tax Notes Federal 106 (2022): 1391.