Bitcoin is an asset, not a currency, Israeli court rules
Israeli court has entered the ring of proving what Bitcoin really is and what it isn’t. On 21st May 2019, a judge in a court in Israel ruled that Bitcoin is not a currency but rather an asset. The case featured the founder of DAV, Noam Copel, who had made a fortune of $2.9 million in selling Bitcoins he had bought in 2011.
The ruling puts all Bitcoin investors in Israel on notice since any earnings made out of Bitcoin investments will be liable to capital gain taxation. The only question is will you have to pay the tax after selling or will you have to pay the tax also when buying the digital currency?
However, according to Copel, cryptocurrencies should be considered as a foreign currency since they are used in transactions just like fiat currencies.
Since the time Bitcoin was invented, governments have fought the digital coin due to what seems like lack of a clear understanding of how to group the digital currency. Actually, this has played up in most countries as governments try to come up with regulations and they can agree on where to classify the cryptocurrencies, especially Bitcoin.
The controversy surrounding Bitcoin is mainly because the digital currency blockchain has no other use other than acting as a payment option. Other cryptocurrencies like Ethereum have blockchains which have found lots of other work other than just being payment options. But at the same time, Bitcoins are owned as investments and sold for profits thus making it a form of an investment asset.
The Israel Tax Authority (ITA) maintained that for Bitcoin to be termed as a currency, it should have a physical manifestation according to the laws in the country. And everyone knows that Bitcoin is a digital currency, meaning it is not tangible, the judge ruled that due to the fact that Noam Copel could not prove that Bitcoin met the requirement of the law, the digital currency is, therefore, an asset and he is obliged to pay tax from his earnings.
This ruling is most likely to affect the rest of the cryptocurrencies since they also have no physical representation. Therefore, cryptocurrency investors will most likely have to pay taxes in Israel maybe until proper crypto regulations are stipulated. But Israel isn’t the only country struggling with coming up with a way of taxing cryptocurrencies. There is still a lot of ambiguity surrounding how digital currencies should be taxed.