Taxation of earnings yielded from cryptocurrencies

In the 2008 paper titled "a peer to peer cash system" written by the cryptology expert Satoshi Nakamoto, he announced the first-ever crypto currency called Bitcoin. This digital entity which is not supported either by any central authority or bank, became the point of attraction for illegal trading due to its anonymity characteristic. As a result of this attraction, Bitcoin started to be enumerated at the black list of central authorities as seen at the Silk Road investigation (2013); nonetheless it still preserves its significance among the tech companies due to its dispersed network structure. Since 2008, the number of cryptocurrencies in the blockchain ecosystem has expanded exponentially and exceeded the four-thousand threshold. Besides, the number of online settlement platforms through which these currencies are processed is now almost ten thousand. Since the usage of cryptocurrencies becomes widespread day by day, even central authorities began to give particular importance to them. The central authorities such as FED, BIS and ECB have published a number of reports on cryptocurrencies while demanding to impose certain regulations on them. Although some of the countries put forward legal regulations in relation to these reports, there is still a lack of consensus on the structure of these regulations. This complicacy makes the cryptocurrencies that are legalised by the regulations to face with the taxation problem. Even though taxation procedures are going in a moderate way at the countries where cryptocurrencies are legally recognised, the taxation process has grave challenges at the countries where cryptocurrencies do not have any kind of recognition. Although many countries and tech entrepreneurs consider cryptocurrencies as a method of payment, different approaches developed by central authorities led the taxation process to be a controversial topic. In this research, after examining the history of method of payments and cryptocurrencies in the blockchain ecosystem, the taxation process belonging to the cryptocurrencies which have differing implementations within the countries as well as the challenges on it are scrutinised. This study focuses on the taxation process of this controversial entity by discussing particularly the earnings yielded from them. Keywords: Blockchain, Cryptocurrencies, Taxation, Bitcoin