Crypto tax has moved from being a rumor to a certainty at this point. Although it is still unclear when and how it will be imposed specially in the US, it will surely cause some pain. One particular reason for this rapid development in the legal situation is perhaps the bubbling inflation all around the world. 2020 was the year to print money for the troubled countries as the pandemic left a big dent in economy. Considering the tangible effects of inflation in numerous countries, more and more people are gravitating toward cryptocurrencies. In that regard, governments are concerned about a possible Armageddon.
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Apocalypse Now!
The growing inflation in the United Sates is at this point spiraling out of control. Hyperinflation used to be a fictional term deemed too pessimistic to be true. However, a considerable number of US population are now believers of an upcoming financial crisis much like the great depression in the 30’s. And at times of trouble, people look for Noah’s Ark.
Institutional investors have a lot to lose if the economy experiences turmoil of any magnitude. Naturally, extraordinary sums of money are now being hedged and ready for a possible storm.
Gold has always been the crowd favorite when it comes to hedging. As the foundation of fiat currencies, it maintains the value minus the cost of keeping it secure. But, there is a new kid on the block standing to fight gold with a chain (get it? Block and chain?).
Cryptocurrencies are stealing gold’s customers as a new option to hedge against inflation as we have previously reported.
Enter the Dragon
Undoubtedly, a massive and sudden growth of the crypto market in case of a financial crisis will seriously shake the foundation of fiat currencies. Essentially, gold will lose so much value and it will make the economic recovery gruesome if not impossible.
And so, the regulators are now coming in with guns blazing to regulate and tax the fluff out of crypto. Remember that this is not only happening in the US. Russia and India are looking to completely ban all cryptocurrencies.
Despite a plethora of various reasons for regulators to rage against the crypto, the growing inflation seems to be of utmost priority. By targeting stablecoins and taxing cryptocurrencies specially in the early 2020, US regulators will make their move.
It would be interesting to see where we stand from a financial stand point in 2022 and how the inflation would turn out. Yet, it surely seems that investors using crypto as hedge against inflation has the governments worried.
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