Cryptocurrency and Tax Regulation: Global Challenges for Tax Administration

Abstract

This chapter investigates whether the government should taxed cryptocurrency or not by using game theoratical framework. In this game, both government and cryptocurrency investors will determine the strategies to maximize their own benefits. In order to achieve the Nash equilibrium, two-person zero sum game matrix is created. As a result, Nash Equilibrium occurs in only the one case that indicates cryptocurrency should be taxed with low tax rate and high penalty rate. Moreover to understand tax policies of cryptocurrency this chapter also investigate various countries taxation policy on cryptocurrency. It is clear that there is no consensus among countries about legal status and taxation process of cryptocurrencies.