The relationship between China and the crypto market is very complicated, and one cannot sum it up in a few words. There have been some restrictions on cryptocurrency since the beginning of the crypto market. Despite this restriction, China is one of the top 10 countries with the most crypto users. When FTX collapsed a few months ago, it was revealed that China’s customers’ share was the third highest.
This shows the importance of China to the crypto industry, and anything the Chinese government does will ultimately affect the overall sentiments of the market. The Chinese imposing a tax on cryptocurrency transactions is a good move because it will uplift the whole crypto market. Here is how:
China is taxing crypto investors.
Despite China’s complicated relationship with the crypto industry, some local governments in China have recently begun imposing an income tax on cryptocurrency. As the number of crypto whales, miners, and investors grows, local governments have decided to levy income taxes on them. The auditing of these whales and investors started in early 2022, and the results are coming in a few weeks.
The tax authorities have gathered detailed information about cryptocurrency investors and Bitcoin miners. The Chinese domestic tax authorities are going to implement a 20% personal income tax on investment profits. Additionally, individual cryptocurrency investors are also coming under the umbrella of income tax.
History of China and the Crypto Industry
The relationship between the crypto industry and China has been ups and downs. A decade ago, China restricted the use of cryptocurrencies in the country. The decision was taken by the country’s banks; however, this did not lower the number of crypto users in the country. Now China is in the top 10 countries. And China knows that. As a result, it is gradually accepting the cryptocurrency market. The recent tax imposition is proof.
How will it affect the market?
After the tax imposition, H.E. Just Sun, founder of Tron, tweeted about it. He views this as a win for the crypto market. According to Justin Sun, China’s implementation of the tax on crypto transactions is a step toward cryptocurrency regulations in the country. He further writes that the Chinese government clearly sees cryptocurrencies as a legitimate form of wealth and wants to make certain that it is properly taxed, as seen by the tax on crypto transactions.
Furthermore, he writes that this tax policy is going to make crypto adoption more certain and faster in the country. It is because the policy offers a clear framework for individuals as well as businesses. Justin Sun added that, because of the wide usage of cryptocurrencies in the country, the government is going to regulate the crypto sector very soon. This will give more credibility and stability to the crypto market.
Additionally, the tax on cryptocurrencies will prove to be a good step for the whole crypto market. He urged other countries to follow China’s lead in regulating the policy related to cryptocurrencies.
Final thoughts
The history of the crypto industry and China has not been a good one. There have been restrictions on the crypto industry within the country. But there are thousands of investors and whales that cannot be ignored; in fact, the number is so massive that if it wanted to, the country could instantly destroy the entire cryptocurrency market.
Source: https://www.cryptopolitan.com/china-step-toward-cryptocurrency-regulations/