Imposing tax on NFT tokens on gains is not a new narrative. This narrative has been in trend for over months. In recent days the pursuit of financial regulators about imposing tax on NFT tokens has become even intense.
One of the biggest reasons behind this is Covid-19. Over the past couple of years, governments across the globe have failed to earn and collect money because the trade and many important businesses were totally shut down. In that critical scenario crypto, especially NFT tokens have provided great return on investment.
Hence financial regulators across the globe are doing their best to impose taxes on the NFT token gains. As the market of NFT tokens goes big so does the debate of imposing taxes on NFT gains. An NFT is digital ledger that stores data digitally. That’s why NFT tokens can be really expensive. However, almost over 90% of the NFT tokens can only be stored on the Ethereum blockchain. NFTs tokens are almost identical to Bitcoin in terms of nature. But NFTs in real are not absolutely fungible.
Each NFT token further hides the digital assets which are rare in nature. In other words, NFTs are like digital prints or signatures of hidden assets, in other words, these are digital trading cards. Some experts have named NFTs as the digital arts as these tokens determine ownership of digital assets in the form of form of arts, music, sports, gaming and other.
Usually, digital artists carve various sorts of artworks on digital tokens. Usually, there are multiple NFT tokens for a single digital art. When some specific digital art is introduced creates a series of art NFT tokens. Usually, the authority that owns the rights of any specific digital art owns all the NFT tokens regarding that digital art. In the modern digital era relatively larger number of artists have chosen the digital form of media because of the longevity of the medium.
The regulatory authorities of many countries have argued that NFTs basically fall within the assets class like paper currency, stocks, and penny stocks. So NFTs must be entitled to tax. The term NFT was formulated back in 2017 by the Ethereum developers and since then NFTs falls within the cryptocurrency domain. This long-lasting conflict between regulators and crypto market is yet to be settled. Another major blockchain platform, Larva Labs launched their own NFT tokens CryptoPunks. Almost over 70% of the NFT tokens are traded on the Ethereum blockchain. However, recently institutional investors like Nike have shown their interest in the NFTs tokens. This has one more triggered tension between the NFT platform and financial regulators.