Taxation Will Shape the Future of DeFi and NFTs: Legge
Michelle Legge, head of crypto tax education at portfolio tracker and crypto tax calculator Koinly, said recent developments—from the Biden administration’s executive actions to severe global inflation—have intensified discussions around central bank digital currencies (CBDCs).
Central bank digital currencies are digital representations of a nation’s fiat currency, issued by the central bank to enable faster, simpler transactions and to increase the enforcement of monetary policy controls.
Legge noted that governments are eager for CBDCs, arguing they offer expanded authority and control similar to China’s social credit system. She described CBDCs as “a completely different blockchain beast,” distinct from visions of Bitcoin-empowered futures.
When asked which so-called killer apps might endure, Legge pointed out that although significant progress has been made toward retail-use cases for DeFi, she hopes the space will not be doomed to obscurity by taxation.
The expert also argued that NFTs present many new opportunities across crypto and beyond:
“If people can connect to the ‘blockchain’ through images, it’s reasonable to assume that everything we once saw on paper could become NFTs—digitized and ownable.”
“What might that look like at its most basic level? Share certificates, diplomas, medical records, insurance policies, birth certificates, passports, and so on.”
Legge further suggested that, similar to the gaming industry, the creation, distribution, and administrative management of NFTs that prove ownership could spawn their own industries. However, she emphasized that tax regulations will play a crucial role in determining NFT success.
“…nobody wants to face a tax bill for a mistaken ‘realization’ tied to the ‘disposition’ of an insurance policy. There must be clarity for everyone, including taxpayers, that NFTs used in these ways have zero taxable value.”