According to The Telegraph, El Salvador’s decision to declare Bitcoin legal tender could cause complications during tax time elsewhere in the world. The HMRC in the United Kingdom may be challenged in court by investors looking to reduce their tax burden through the use of a foreign currency loophole, according to a source. Capital gains tax does not apply to money generated through changes in foreign currencies deposited in bank accounts, but it does not apply to crypto.
UK may lose millions in taxes on crypto due to El Salvador loophole
However, the research points out that because Bitcoin is used as a regular currency in El Salvador, it may be eligible for preferential tax treatment — unless HMRC intervenes.
Much has been said about how cryptocurrencies are changing the way people trade and invest. But, as headlines tout Bitcoin and other cryptocurrencies as (maybe, maybe) becoming a viable replacement to cash, and El Salvador takes major steps forward by adopting Bitcoin as legal tender, cryptos have also changed commercial payments.
Surveys of 250 executives found that cryptocurrency and blockchain technologies are becoming increasingly useful for cross-border firms in the research “Cryptocurrency, Blockchain, and Cross Border Payments,” produced in collaboration with Circle and PYMNTS. The companies polled had annual sales of at least $10 million.
Many investors’ fortunes may alter if HMRC recognizes Bitcoin as a currency. According to the research, if more countries use Bitcoin as legal cash, it will be difficult to justify its exclusion from the exclusions.
Despite the fact that Bitcoin values have nearly doubled this year despite instability, El Salvador’s president, Nayib Bukele, has banked on digital assets as a strategy to make his country a major crypto destination.
Meanwhile, according to The Telegraph, a British man named Hisham Chaudhary has been found guilty of using bitcoin to send money to the Islamic State. He is claimed to have said in 2019 that they had “been doing this for years but no one has been captured by Allah”. According to the BBC, this is the first time a British court has found someone guilty of using cryptocurrency to fund terrorist activities.
The Telegraph reports that Chaudhary allegedly sent £5,000 to fund the escape of a Danish jihadist’s wife from a prison camp. However, as the use of digital currency becomes more widespread, regulators believe they will need to scale up their efforts to combat such crimes. In one attempt, the City regulator intends to enlist the assistance of crypto experts to assist with training on how to combat money launderers and other criminals who exploit digital assets.
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Also read: After Cabinet approval, Govt. to introduce new crypto-law in Parliament: Finance Minister
