US tax watchdog classifies NFT as digital assets for tax purposes

The U.S. Internal Revenue Service (IRS) could statesman to taxation non-fungible tokens (NFTs) arsenic it has classified them arsenic integer assets alongside virtual currencies successful its updated draft instructions for the 2022 taxation year.

According to the IRS, integer assets are “digital representations of worth that are recorded connected a cryptographically secured distributed ledger oregon immoderate akin technology. For example, integer assets see non-fungible tokens (NFTs) and virtual currencies, specified arsenic cryptocurrencies and stablecoins.”

The IRS archetypal defined virtual currencies “as a portion of account, a store of value, oregon a mean of exchange” successful 2021.

The taxation regulator stated that immoderate plus that shows the characteristics of a integer plus would beryllium treated arsenic specified for taxation purposes — meaning NFT investors indispensable study each taxable NFT income for the taxation year.

With this development, the U.S. joins countries similar Singapore, Israel, and India, which besides tax NFTs.

Meanwhile, the caller classification helps lick the ambiguity surrounding NFT taxation. Previously, experts had argued that the assets should beryllium classified arsenic collectibles which would person attracted a higher superior gains taxation rate.

The Securities and Exchange Commission (SEC) precocious showed involvement successful the NFT abstraction by investigating Yuga Labs. The regulator wants to find if immoderate of the firm’s NFT collections suffice arsenic unregistered securities.

NFT wintertime is here

A precocious released Coingecko report showed that the NFT marketplace suffered a monolithic downturn successful the just-completed 3rd quarter.

Source: Coingecko

According to the report, the apical 5 NFT marketplaces saw their trading measurement diminution by 77% compared to the 2nd 4th of this year.

For context, the trading measurement connected the largest NFT marketplace, OpenSea, crossed the $3.5 cardinal people successful January but recorded a paltry $326 cardinal successful the past 30 days, according to DappRadar data.

Meanwhile, Solana-based Magic Eden has eaten into OpenSea’s dominance. According to Coingecko, its marketplace dominance roseate to 22% successful Q3 from 9%, portion that of OpenSea declined to 60% from 90%.

The station US taxation watchdog classifies NFT arsenic integer assets for taxation purposes appeared archetypal connected CryptoSlate.