Virtual Currencies: Estimating the Revenue from Taxing Bitcoin in Light of the US Experience and Proposing a Method of Taxation

Abstract

The aim of this study is to estimate the tax revenue of Bitcoin that could have been generated between 2014 and 2017, in the United States, which is the first state in terms of trading volume on online exchanges of Bitcoin in 2020. The authors hereby respond to the question whether the taxation of such a currency can constitute a supplementary budget resource for states whose public expenditures are rising especially after the COVID-19 pandemic. This study is the first using Bitcoin’s exchange rate to assess taxable revenue based on the supply-and-demand law of Bitcoin and USD. The authors made estimates based on the observation and analysis of the Bitcoin/USD exchange rate. The resulting estimates show that taxing Bitcoin can generate an important tax resource. Given that no consensus has been reached by worldwide authorities on the taxation of such a resource, the authors set forth a possible global solution.