In legislation, the approach driven by the desire to encompass everything, to leave no gaps or loopholes, generates chaotic and incomprehensible results. The case of taxing crypto assets is truly exemplary.
Here’s what happens: instead of first establishing what a crypto asset is and whether there are differences among them in terms of nature and use, there is a rush to provide the broadest possible definition, resulting in a series of errors.
Firstly, it includes the taxation of capital gains from the sale of any crypto asset, without even considering the substantial difference between a Bitcoin and an NFT. This difference is significant enough to justify not treating these two crypto assets equally in terms of taxation, especially regarding the generation of different types of income.
While cryptocurrencies can be assimilated to traditional currencies, allowing for an equal treatment of capital gains as different income, the same cannot be said for NFTs, which can be likened to works of art or intellectual property and should not generate taxable different income.
Secondly, it includes the taxation of income derived from the possession of crypto assets. This is equivalent to taxing something that doesn’t exist and may never exist.
A semantic approach would have allowed for a simple and correct classification of crypto assets.
The first step is to determine what a crypto asset is and how it can fit into the legal concept of property codified in Article 810 of the Civil Code. It has rights, and it holds economic value. Therefore, it can be considered as a legal property.
The second step is to identify the specific characteristics of each crypto asset, its nature, function, and use. This would have easily led to differentiation between cryptocurrencies and NFTs or tokens representing rights.
The final step is to assimilate each crypto asset to tangible assets with similar characteristics. Bitcoin can be likened to currencies, NFTs to works of art, and so on. Taxation would have been a logical consequence, and the adjective “virtual” would have been sufficient to specify its inclusion and make it certain.
Instead, we now have a complicated situation. A new law introduces the taxation of crypto assets. So why impose retroactive taxation? Are capital gains from the sale of NFTs also taxable? How can we justify the inequality compared to capital gains from the sale of traditional artworks, which remain non-taxable when realized outside of a business activity?
This clearly demonstrates the importance of a semantic approach in attributing meaning and interpreting laws.
Legislating is not much different from communicating; only the legal relevance of language changes.
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