Cryptocurrency prices fell on Tuesday as Britain announced plans to crack down on misleading advertisements for crypto-assets.
The Department of Finance said around 2.3 million people in Britain now own a crypto asset, Reuters reported. But the department said research suggests understanding of the industry is declining, meaning some users may not fully understand what they are buying.
“Crypto-assets can provide exciting new opportunities, giving people new ways to transact and invest – but it’s important that consumers don’t find themselves selling products with misleading claims,” he said. UK Finance Minister Rishi Sunak in a statement.
“Exciting New Opportunities”
Spain also announced new rules on how social media influencers and others can advertise cryptocurrency assets.
In an apparent first for the European Union, Spain’s national securities market commission has been given powers to regulate crypto advertising, the Financial Times reported.
And the Monetary Authority of Singapore issued guidelines on Monday that prevent cryptocurrency trading service providers from promoting their services to the general public. This is part of an offer to protect retail investors from potential risks.
At last check, Bitcoin was down nearly 3% to $41,449, while Ethereum fell 4.7% to $3,116 and dogecoin fell 4.6% to $0.1627, according to Coindesk.
IRS tax rate view of NFTs questioned
Meanwhile, in the United States, David Lesperance, managing partner of immigration and tax consulting at Lesperance & Associates, said that as non-fungible tokens, or NFTs, become more popular with investors, “new that the [Internal Revenue Service] considers them “tangible collectibles”, and therefore subject to higher tax rates than long-term capital gains, is not welcome.”
The top federal marginal tax rate for tangible collectibles is 31.8%, he said. By comparison, long-term capital appreciation in bitcoin, ethereum, and other digital coins is subject to a maximum rate of 23.8%.
“Just as it’s important to know the long-term capital gains requirements versus ordinary income when buying and selling cryptocurrency,” Lesperance said, “US taxpayers who rush in NFT markets need to recognize that their after-tax net realization on NFTs will be lower than what they might be used to in the cryptocurrency space.”
One solution to consider, he said, is to move to a tax jurisdiction like Portugal, which does not consider capital appreciation in cryptocurrencies or NFTs to be taxable.
“A busy regulatory year”
Besides the IRS, Lesperance said, “the crypto industry is gearing up for a busy regulatory year 2022.”
“From the Treasury defining the exact crypto exchange reporting requirements that were in the infrastructure bill to the Securities and Exchange Commission and the Commodity Futures Trading Commission flexing their regulatory muscles on issues such as stablecoins and de-fi, the crypto world must “anticipate the predictable” and act accordingly,” Lesperance said.
Winston Ma, Managing Partner of CloudTree Ventures, said metaverse and gaming related tokens have remained resilient lately. This is in part thanks to strong mergers and acquisitions activity in the games sector, including Take-Two Interactive (TWO) – Get the report from Take-Two Interactive Software, Inc. Acquisition of Zynga for $12.7 billion (ZNGA) – Get Class A report from Zynga Inc., which was announced last week.
“There is definitely a thirst to play to win [or P2E] games in the market, exemplified by the jump in market capitalization of companies like Sandbox and Decentraland,” Ma said.
“Take-Two can be expected to accelerate blockchain integration into mobile games from Zynga, which in December formed a partnership with blockchain gaming powerhouse Forte.”