To Tax It or Not To Tax It; The Changing Dynamics of Unrealized Profits

At first, I want you to go through this video linked here. Okay, you heard it right! Trevor Noah speaking on how the tax system is so flawed in all its capacity because you cannot tax someone who hasn’t sold the shares. But the same person can take loans against the same, and they will not have to pay a penny at all in taxes. 

That said, imagine someone who has bought bitcoins in 2013 at say $1 or so and they are sitting on a stack of cash, which they claim is not theirs until they realize it. But, the caveat is that they are using that to raise loans and fund their pursuits. In the end, they pay just the interest amount, pursue their dreams, hold zero accountability to the government and still cry crocodile tears that they are poor. Sounds hilarious, right, but so be it, that’s the regular affair. Not anymore!

The Changing Dynamics In Taxation: The Alternate Route To Sabotage 

So far, the money-hungry tax agencies couldn’t slap hard on the cheeks of HNI because their only justification is that they have the money, but at the same time, they don’t have the money until spent, but that dynamics is going to change, thanks to Denmark. From 2026 onwards, the Danish Tax Law will consider URPL/ or Unrealized Profit/Losses as a medium to equate someone’s wealth. With that said, now there will be a 42% Capital Gains Tax on BTC earnings, whether realized or unrealized, in Denmark. 

Why Every Country Must Follow In the Footsteps of Denmark?

It is necessary to follow in the footsteps of Denmark because at the time of writing this piece, there’s a staggering 88% of Bitcoin’s circulating supply in profit , and these BTCs are falling under the URPL. But the hodlers are simply staying buoyant with their holding because the tax agencies are not in a position to tax them. But it is important to tax URPL/ because in this manner, crypto is increasingly going to be used as a medium for laundering the funds, if no rightful actions are taken. So far, there’s a narrative going around that the United States will be creating a BTC Reserve out of the confiscated assets. 

This could be the time to begin with that vision by analyzing all the money invested in BTC as URPL and taking the necessary course of action to tax them accordingly to offset tax evasions. Ideally, one could easily say that crypto contributes to a fraction in money laundering when compared to cash, but the technology has been engineered in such a way, that it is a perfect programmable money to challenge the existing financial system and exploit the loopholes for their own gains. 

Will There Be Repercussions? 

Yes, there could be dissent from all the faction of the society because at one end of the spectrum, you will have folks questioning the claim and levelling the same as dictatorship, but imagine leaving an asset class completely free from the fringes of taxation and that asset class is completely decoupling the existing financial system. When such things happen, how would you retort/ respond?

It is high time to take measurable actions through a unified consensus coming from all countries engaged in crypto regulations. Not only will this help make crypto mainstream but also drive away all the narrative of the wild wild west attached to its name. Moreover, sooner or later, some of the tax havens like Dubai will also have to follow in the footsteps of the rest of the world if everyone accepts the same standards. But much of it sounds like utopia for many. However, the sooner we realize that some aspects are increasingly getting worked upon, exploited for no public good, the sentiments will change for the better. 

 

Disclaimer: The views expressed are personal and shouldn’t be taken as representing an organization, community or faction. It is just to take a critical look at things from a different prism.