Discussion On The Tax Treatment Of Encrypted Tokens Based On Blockchain Technology

Blockchain technology based crypto tokens are tradable proof of rights on the blockchain network,which guaranteed by the power of cryptography.Crypto tokens include Bitcoin,Etherum,BNB,etc.Since the mining of the first Bitcoin in early 2009,thousands kinds of crypto tokens have been created.Although the policy is still uncertain in China,domestic crypto token related business are blooming,as well as their market capital.Crypto tokens have the characteristics of decentralization and anonymity,together with other special economic businesses,such as mining,offering,destruction and so on.However,policy makers have not carried on any corresponding regulation to the tax treatment of the crypto tokens.We have to face to two problems,one is conducting tax supervision on crypto tokens related business,another is deciding its tax treatment.In order to avoid the loss of tax sources,and regulate the crypto tokens business so that it can play a positive role of the token economy on social efficiency,we need to study the tax treatment of crypto tokens.This paper mainly adopts literature analysis and case study to study the topic.At present,due to the relatively new concept of crypto tokens,and the domestic literature on it mainly focuses on bitcoin,there are few studies on the tax treatment of crypto tokens.Therefore,we have consulted the government regulations and academic documents of countries or regions where the tax processing of cryptographic certificates started earlier,such as the United States,Japan and the European Union,which have provided great help in understanding the attributes of crypto tokens.Secondly,we conducted interviews with practitioners in the crypto tokens industry at home and abroad,and discussed the tax treatment of crypto tokens more specifically by analyzing the actual cases they encountered in the daily business.In order to clarify the applicable method of tax treatment of crypto tokens,according to the source of rights represented by them,we divide them into consensus type and anchor type.The value of consensus token is based on the recognition of its value by all users and holders,without any specific organization or individual endorsement,and with little asset support.Since consensus cryptography has the nature of general equivalent in some occasions,it can be regarded as a special commodity with the function of payment tools,such as gold and other precious metals,which are represented by bitcoin and Etherum.The value of the anchor token is derived from the anchored assets,whose value is endorsed by specific organizations or individuals,and can be regarded as securities,which are represented as BNB,USDT.In the income tax system,we discussed the individual income tax and the enterprise income tax separately.In individual income tax,the main point of tax treatment involving crypto token income is to determine which kind of income it belongs to.First,the receipt of crypto token from other organizations or individuals in the form of consideration for the provision of goods or services shall be taxed as comprehensive income.Among them,if one receives some anchor token from his employer and that anchors the enterprise profit,he can calculate it by referring to the current treatment of equity incentive in the tax law.Second,taxpayers receiving mining income shall be treated as operating income.Finally,taxpayers who obtain income from the airdrop of crypto token shall recognize the accidental income according to the price when the crypto token obtained have a fair price in the market.In enterprise income tax,we divide the discussion into the holder and the issuer according to the relationship between the taxpayer and crypto token.First of all,for the holding enterprise,crypto tokens should be recognized as the assets of the enterprise.The current tax regulations can deal with most of the problems,so it will not be further described.Secondly,for issuers,when developing consensus token,they should recognize their income based on their prices and holdings when the consensus token developed by them has a fair market price.If the anchor token issued is anchored to enterprise's own rights and interests,issuing shall be regarded as a financing act,without the need to recognize the income,but the expenses used for repurchase to reduce the market circulation share shall not be deducted as pre-tax enterprise income tax.If the anchoring object is not its own equity,it shall be recognized as income from the sale of crypto token.In the consumption tax system,only when the crypto token related business is essentially the consumption behavior will created a tax liability.Therefore,when the crypto token is only used for the purpose of payment instrument,it should not be included in the scope of VAT tax;However,the crypto token transaction which used to pay for the operation of the network consumes the computing services of the whole network.So it belongs to the scope of value-added tax.In addition,the crypto token issued through "mining" is not in line with the scope of taxation stipulated by the resource tax,so the resource tax should not be levied.In addition,there is no justification for levying a digital resource tax on the encryption and approval of "mining",so there should be no new tax category.Finally,we propose potential solutions to the practical problems encountered in the tax treatment of crypto tokens.The solutions include: clarifying the nature and classification of crypto tokens,implementing infrastructure such as compliance crypto token exchanges and legal wallets,and strengthening international cooperation.