Cryptocurrencies, since its inception, have rallied against government interference. Ripple has firmly positioned itself as pro-regulation. The US-based blockchain firm has repeatedly voiced its stance for a framework.
And while the Brad Garlinghouse-led firm had previously urged the regulators not to paint the firm with a broad brush, another exec expressed a similar sentiment on the stage of OECD Global Blockchain Policy Forum. Liz Chien, Vice President of Global Tax and Chief Tax at Ripple addressed issues regarding tax treatment of digital assets.
While addressing a panel discussion, titled, ‘Tax and Blockchain: From tax administration to transparency and the tax treatment of digital financial assets’ Chien stated that it is “hard to tax on something that does not have a consistent definition”. Despite noting the fact that different countries have reviewed crypto-assets with different approaches and while most countries have started treating crypto-assets “as some type of asset”, there is still a long way to go.
She said that for non-tax people, categorizing a crypto-asset on the basis of its use-cases in different transactions, would seem like a “sufficient guidance” that brings about clarity to the table, but only a “tax technician” will realize that it is just a starting point because there is a whole host of a different asset, all “with different tax treatments”.
One major thing that poses a challenge, according to Chien, is when a regulation or existing guidance essentially states that “you need to treat this as an asset but the only asset that you cannot treat it as is a currency equivalent”. She said,
“I think this is quite difficult because, in this space, a lot of times crypto-assets are used as a medium of exchange. And so economically and from a practical perspective the closest analog is probably currency because the currency is the only thing that the taxpayers have been told that we can treat it as, and that is where you end up having some awkward and potentially misaligned interpretations”.