The Impact of Cryptocurrency Taxation Policies on Investor Behavior and Market Activity: An Empirical Analysis

Abstract

The systematic research of the empirical evidence in different jurisdictions will explore how the issue of cryptocurrency taxation affects investor behavior and market activity. The research is founded on 17 validated sources to analyze the behavioral shift of cryptocurrency investors towards intervening taxation, reporting regulations, and rate structure using 17 confirmed sources (NBER working papers, IRS statistical reports, global regulatory reports, and academic scholarly articles). The analysis demonstrates that compliance with cryptocurrency taxation is particularly low in the majority of countries in the world with an average of 0.53 percent of investors reporting tax on cryptocurrencies, but by 25 percentage points, compliance may be increased by compliance interventions such as reminder letters. The study finds that aggressive taxation such as the 30 per cent flat tax in India caused falls of 90 per cent in the domestic trading volumes, and the information reporting policies led to high compliance cost, which was not commensurated by the revenue collection. The study has added to the growing body of research on the topic of cryptocurrency trading by offering empirically validated evidence of the elasticity of cryptocurrency trade to alterations in tax regulations and effectiveness of alternative enforcement strategies.

Keywords: Taxation Of Cryptocurrency, Investment Behavior, Tax Conformity, Investment Activity, Digital Assets, Enforcement Interventions.