Alex Metzger Alex Metzger 24.03.2022

Airdrops in Crypto Space Lead to Hurdle Valuation Swap

The whole cryptocurrency investors and their space will get caught in the valuation of the cryptos. It is because the cryptocurrency exchanges like Quantum AI have given many offers to people. Also, the Blockchain network is set up in every corner of the world, and therefore, the airdrop of coins can be a little bit complicated. Also, swapping one cryptocurrency for another will be very difficult because of the website's lack of definition of value. There has always been a valuation of every crypto coin in the universe, and therefore, the use of digital assets was straightforward. However, things got complicated as soon as the cryptocurrency exchanges rolled out the free coins to promote promotional drives. These are directly sent into the people's digital wallets, and therefore, it creates a problem.

Now things have completely changed. Every cryptocurrency developer, Blockchain-based project, or any other thing in the world in the crypto space will experience the market efforts. They will get coins by cryptocurrency exchanges as the AirDrop will be random. The cryptocurrency companies pick up random addresses from the Blockchain network to provide AirDrop with free coins. In doing so, they create problems for the investors and anyone who will get it. The value of such gifts is not verified as they are new coins, and the market is yet to discover their value. In such a situation, if you are about to pay taxes on the same, how can you value the tax or even the commodity you will pay the tax.

Things get even more complicated because the AirDrop coins or tokens are not yet developed or traded at a specific price. Therefore, the company does not define its valuation. Therefore, they are not readily available for trading and investment purposes. Also, the investors do not control their free air drop-off points because they cannot say no to these digital gifts. They cannot block these airdropped coins from their digital wallets, creating confusion.

What’s the issue?

The issue arises from the taxation policies of the government in the country you are living. It is the choice of investors if they want to disclose the gift or pay the taxes on the same. If they disclose the holding of these gift assets in their wallet, they will have to pay taxes on the same, but the value is not defined. Also, if they decide not to disclose the holding or valuation of the gift coins they get, it will create further problems. Suppose that the person decides to further purchase any goods or commodities with the help of those coins. If the value is not defined, how can someone accept those coins in exchange for anything else? Most traders and investors ultimately decide to convert their digital currencies into legal tender. But, that will lead the tax department to chase you.

The problematic situation in the valuation of digital assets is involved in every kind of transaction. Every investor, exchange, or person selling goods and services to exchange crypto coins will not fulfill the tax obligations. It is due to low clarity about the valuation of crypto coins. The coins given as AirDrop to the cryptocurrency holders will entail taxed revenue, and therefore, they need to have some value at a given point in time. However, if someone holds these coins in the future, there will be a lot of limitations around the clarity of value of any such commodity they are holding.

About the Coin Swap

A coin swipe occurs between two investors when they make peer-to-peer transactions. Also, we can see that the coins web occurs between the trader and a cryptocurrency exchange when a person decides to sell and purchase another coin. Whenever such a deal is made, it is the rate even number of questions. Well, in a coin swap, it is required to have both legs of the transaction. Both of them had to pay 1% tax deducted at source, and also, the exchanges had to deduct 1% tax from the investors. Therefore, the investor has to be more money in terms of TDS. However, due to the volatility, it is never set about the right amount of tax to pay.