Justin Sun says China taxing crypto means legalization is coming
(Kitco News) - Justin Sun, founder of the TRON network and recently confirmed ‘leader’ of the Huobi cryptocurrency exchange, said in a twitter thread on Sunday that he believes China will soon loosen restrictions on crypto.
“China has taken a big step towards cryptocurrency regulation with the implementation of a tax on crypto transactions,” Sun wrote. “The tax on crypto transactions is a clear indication that the Chinese government views cryptocurrencies as a legitimate form of wealth and wants to ensure its proper taxation.”
Sun was responding to a report published by Chinese technology journalist Colin Wu on Jan. 25 which revealed that Chinese tax authorities had been conducting investigations into the revenues of ‘crypto whales’ to tax their income. Wu quoted an anonymous whale who told him that “since the beginning of 2022, a local tax department asked for an audit of its personal income tax. There are many people and a detailed list of the whales that have been inspected.”
Wu also said that the audit process of the large crypto investors is still ongoing, but they are looking to apply the basic Chinese income tax rate to their earnings. “The tax rate of property transfer income in personal income tax is 20% of personal profit/income, in the above specific cases, it should be 20% of the income from the fund.”
Sun said this new engagement by tax authorities should boost cryptocurrency adoption in China “as it provides a clear regulatory framework for individuals and businesses,” and that he expects “that the government will further regulate the crypto industry, providing further legitimacy and stability.”
Sun also said that TRON and Huobi have done a great deal to support “the growth and development of blockchain technology in China.”
Cryptocurrencies have been illegal in China since 2021, so Sun’s comments were carefully worded to take credit for “blockchain technology” while avoiding blame for any ongoing crypto trading.
Wu responded to Sun’s remarks by highlighting another of his findings.
Source: Exchanges such as Huobi provided client information to Chinese tax authorities. Some big customers have already been asked to collect taxes. https://t.co/f4c9a10FEb— Wu Blockchain (@WuBlockchain) January 30, 2023
Sun answered back quickly. “Currently Huobi is based in Seychelles and operates in Caribbeans,” he said. “Huobi doesn't share any client information to tax authorities unless it follows international judicial assistance procedure.”
Wu also cautioned market participants against adopting the most optimistic view of his report. “Some have taken this to mean that the Chinese government may recognize the legitimacy of cryptocurrencies, but the reality is clearly more complex, with tax authorities and financial authorities having differing views,” he wrote.
Different departments of the Chinese government have sent competing signals in recent months. In September, China’s central bank celebrated the success of their crackdown on crypto, which drove the country’s percentage of global Bitcoin transactions from 90% in 2017 to less than 10% in March of 2022. And on Dec. 10, the Public Security Bureau announced the arrest of 63 people accused of laundering 12 billion yuan ($1.7 billion) using cryptocurrency.
On the other hand, the government has shown far more openness to recognizing other forms of digital assets. On Dec. 29, China announced the launch of the China Digital Asset Trading Platform, the first legally compliant secondary trading platform for digital assets across the country.
The new platform represents significant buy-in from several major government departments, including the state-owned China Technology Exchange and China Cultural Relics Exchange Center, the Ministry of Science and Technology, the State Intellectual Property Office, the Chinese Academy of Sciences and the Beijing Municipal People's Government.
Meanwhile, the government continues to expand the rollout of their own central bank digital currency (CBDC), the digital yuan, which now involves 26 large cities and 5.6 million merchants across China.