US tax watchdog classifies NFT as digital assets for tax purposes

The U.S. Internal Revenue Service (IRS) may start taxing non-fungible tokens (NFTs). draft instructions Applies to tax year 2022.

According to the IRS, a digital asset is a digital representation of value recorded on a cryptographically secured distributed ledger or similar technology. This includes virtual currencies such as tablecoins.

In 2021, the IRS first defined cryptocurrencies as a unit of account, store of value, or medium of exchange.

Tax authorities have said that assets exhibiting the characteristics of digital assets are treated as such for tax purposes. This means an NFT investor must report his NFT income for all taxables in the tax year.

With this development, the US joins countries such as Singapore, Israel and India that also tax NFTs.

Meanwhile, the new classification will help resolve the ambiguity surrounding NFT taxation. Previously, experts had argued that the property should be classified as collectibles, which would attract higher capital gains tax rates.

The Securities and Exchange Commission (SEC) recently expressed interest in the NFT space by investigating Yuga Labs. Regulators want to determine whether some of the company’s NFT collections fall under unregistered securities.

NFT winter is here

Recently released coin gecko report It shows that the NFT market suffered a significant decline in the just completed Q3.

According to the report, the volume of the top five NFT marketplaces has decreased by 77% compared to the second quarter of this year.

According to DappRadar, trading volume in the largest NFT market, OpenSea, surpassed $3.5 billion in January, but only $326 million in the past 30 days. data.

Meanwhile, Solana-based Magic Eden eats into OpenSea’s dominance. According to Coingecko, market control increased from 9% to 22% in the third quarter, while OpenSea’s market control fell from 90% to 60%.