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- Ark Invest’s Cathie Wood says bitcoin investors should not trade with the currency until the tax code is changed.
- At the moment, investors need to pay capital gains taxes when making transactions with bitcoin or converting it into fiat currency.
- Wood’s comments come just days after Elon Musk announced that it is possible to buy a Tesla using bitcoin.
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Although large companies like Tesla now allow customers to pay in bitcoin, Cathie Wood advised cryptocurrency investors not to use the cryptocurrency as a payment.
During a webcast on Thursday, presented by Cboe, the founder of Ark Invest warned investors who profited from the rise of bitcoin not to transact with their currencies as they may have to face high taxes.
“The IRS has something to say about this, so if you have big gains in your bitcoin, I don’t think it would take much in the way of transactions until we can achieve some changes on the fiscal front,” said Wood.
At the moment, the IRS treats bitcoin and other cryptocurrencies as “property”, like stocks and bonds – not a currency. When investors sell bitcoin for fiat currency or use it to buy a good, they face capital gains taxes. The amount of tax that a person will have to pay in a transaction involving bitcoin depends on how long he has the currency and how much he has returned from his investment.
Wood’s comments come just two days after Elon Musk announced that it is possible to buy a Tesla vehicle in the United States with bitcoin. Although bitcoin was originally conceived by its founder as a “point-to-point ATM system”, some crypto enthusiasts, like Wood, see bitcoin as another store of valuable assets, similar to “digital gold”.
Bitcoin fell on Thursday by up to 6.7%, to $ 50,440.17, as retail investor interest declined and the options market generated volatility. The currency is still up about 672% last year.