Digital assets

You may have to report transactions with digital assets such as cryptocurrency and non fungible tokens (NFTs) on your tax return. Income from digital assets is taxable.

What’s a digital asset

For U.S. tax purposes, digital assets are considered property, not currency.

A digital asset is stored electronically and can be bought, sold, owned, transferred or traded.

The tax definition of a digital asset is any digital representation of value recorded on a cryptographically secured, distributed ledger (blockchain) or similar technology (Infrastructure Investment and Jobs Act).

Examples of digital assets

These include:

• Convertible virtual currencies and cryptocurrencies such as Bitcoin
• Stablecoins
• Non fungible tokens (NFTs)

How a digital asset is used

A digital asset that has an equivalent value in real currency, or acts as a substitute for real currency, is referred to as convertible virtual currency, for example, a cryptocurrency. It can be:

• Used to pay for goods and services
• Digitally traded
• Exchanged for or converted into currencies or other digital assets