Taxed for gambling – Every innovation generates its share of debate and questioning. Non-fungible tokens (NFTs) are no exception. This new form of cryptographic asset represented, in its early days, works of art such as paintings and music. The question of their legal status was already the subject of intense debate. But, with the emergence of projects like Axie Infinity
, NFTs have gone beyond the artistic category and the question of taxation associated with these assets is starting to be raised with acuity around the world.
Axie Infinity, the new gaming phenomenon and NFT
Axie Infinity is a game developed by Sky Mavis, based in Vietnam. It is an online adventure game that requires players to purchase NFTs to play. These same players can also earn tokens when they win games on the game. The concept of Axie Infinity is simple, players purchase Axies in the form of NFTs, and then these digital creatures (quite similar to well-fedPokemon
) are raised and trained. Once an Axie is properly trained, the player finds themselves able to take part in battles allowing them to earn cryptocurrency rewards or resell their Axie in hopes of a higher value. Ranking of NFT projects by sales volume – Source: CryptoSlam
Since the beginning of the summer, Axie Infinity and its two native tokens, Small Love Potion (SLP) and Axis Infinity Shards (AXS) have been all the rage. In fact, Axie Infinity is the NFT project that has generated the most sales, surpassing even the popular CryptoPunk. In addition, the Axie Infinity blockchain is the protocol that has generated the most revenue in fees with $515 million over the last 3 months, nearly double the fees paid on the Ethereum network.
<img width=”1384″ height=”648″ src=”https://yellowrocketagency.com/wp-content/uploads/2021/08/image-56..png” alt=’Ranking of the protocols having generated the most revenue over the last 3 months with Axie Infinity in first place having generated more than 500 million dollars.
This spectacular craze is necessarily reflected in the prices of SLP and AXS, which have soared this summer. The SLP has appreciated by more than 900% since May 1, 2021, while the AXS has risen by more than 2,000% over the same period. And, it just so happens that 40% of the protocol’s users live in the Philippines.
country’s economy is moribund and gambling has become an excellent source of income for Filipinos, which does not please the authorities
the Manila Bulletin, the Department of Finance (DOF) of the Philippines is now considering taxing Sky Mavis, the operator of the Axie Infinity universe. This is because the government considers the profits made by blockchain-based gaming companies to be taxable in the country.
<img width=”1503″ height=”868″ src=”//www.w3.org/2000/svg’%20viewBox=’0%200%201503%20868’%3E%3C/svg%3E” alt=’AXS price in daily time unit showing 2,000% increase in few months’ /><img width=”1503″ height=”868″ src=”https://yellowrocketagency.com/wp-content/uploads/2021/08/AXSUSDT_2021-08-26_17-56-32..png” alt=’AXS daily time unit price showing 2,000% increase in a few months’ />AXSdaily time unit price(1D) – Source: TradingView
‘ fiscal ambitions don’t stop there. Indeed, the authorities are also looking into the possibility of taxing the gains made by Axis users. Antonette Tiono, Secretary of Finance, admits that the legal classification of Axis is not yet clear. Indeed, the question of whether Axies are a currency or a financial asset is still not decided in the Philippines,
“Cryptocurrencies are assets, so they are already taxable in the Philippines. What kind of tax applies? Certainly capital gains are subject to income tax […] Is it a security? Is it a currency? These are the things that will help us define the tax rules. But however they are classified, they will be subject to income tax. “
Antonette Tiono, Philippine Finance Secretary As you can see,
no matter how Axies are classified, users will have to declare capital gains on Axies sales. But even if these gains are now considered taxable, a mechanism to determine the
The amount of taxable income and how to tax it is yet to be determined. Tionko is relying on the Philippine Securities and Exchange Commission (SEC) and the Bangko Sentral ng Pilipinas (BSP) to determine the tax framework.
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