Why did Biden's tax increase cause a sharp drop in currency prices? Does China need to pay taxes when speculating in cryptocurrencies?

.1. Cryptocurrency taxation in the United States
On April 22, a piece of news caused a sharp drop in the U.S. stock and cryptocurrency markets. U.S. President Biden proposed to increase taxes on the rich, raising the capital gains tax to 39.6%, almost twice the current highest tax rate. This proposal caused the S&P 500 index to fall by 0.7%, the Nasdaq Composite Index to fall by 0.6%, and the prices of cryptocurrencies such as Bitcoin also plummeted.
For US taxpayers, capital gains tax is an important tax. When you get investment income, you need to pay capital gains tax. For example, if a person turns $1,000 into $10,000 through investment, then $9,000 of it is capital gain. If the asset is held for more than one year, it is a long-term capital gain; otherwise, it is a short-term capital gain, which needs to be taxed. The specific amount of capital gains tax is also related to the actual income of the taxpayer. Take the long-term capital gains tax for holding for more than one year as an example:
For families with per capita income less than $40,000, the tax rate is 0, and no capital gains tax is required;
For families with per capita income above $40,000 but annual household income less than $496,000 (or $441,000 for singles), the tax rate is 15%, and they need to pay $1,350 in capital gains tax.
For families and individuals with income higher than the above, the capital gains tax is 20%, and they need to pay $1,800 in capital gains tax.
If the taxpayer holds the asset for less than a year, the tax rate is higher, ranging from 0-37% depending on the taxpayer's income.
Biden's tax increase will raise the tax rate for households with an annual income of more than $1 million to 39.6%, which is almost double the previous highest rate of 20%. However, the tax increase plan still needs to be submitted to Congress for approval.
In the field of cryptocurrency, according to Forbes research, if you hold cryptocurrency for less than 12 months and sell it, you will be taxed 10%-37% of the profit; if you hold cryptocurrency for more than 12 months and sell it, you will be taxed 0%, 15% or 20% of the profit. Biden's proposal essentially increases the 20% to 39.6%. As early as 2019, the IRS required individuals to disclose cryptocurrency-related income in their tax returns.
At a Senate finance hearing on April 13, U.S. Senator Rob Portman said he was working on a legislative proposal that would clearly define the tax categories of cryptocurrencies and the information reporting rules that traders must follow, saying that the United States loses up to $1 trillion in unpaid taxes each year because of cryptocurrencies.
Although the bill has not been passed and only 540,000 people will be affected by this change, the tax increase is mainly a symbolic meaning for the rich, investors and the cryptocurrency industry, that is, the Democratic Party will release more stringent measures in the future. Combined with the rumor on Twitter that Yellen wants to impose an additional 80% tax on cryptocurrency profits, it shows that the market is somewhat panicked about regulation.

2. Capital gains tax in other countries Japan. In Japan, the gains from cryptocurrency investment are classified as "other income". The capital gains tax rate for "other income" may be as high as 55%. Although 55% is only the highest tax rate in theory and may not be achieved in practice, compared with the "one-size-fits-all" 20% tax rate for stock investment, the capital gains tax for investing in crypto assets is still very high, which also results in taxpayers lacking the motivation to actively declare cryptocurrency assets.
South Korea. Starting from 2022, those who earn more than 2.5 million won (equivalent to US$2,260) through cryptocurrency investment will be subject to a 20% capital gains tax. In other words, if a South Korean taxpayer earns 10 million won through cryptocurrency investment, he or she will have to pay a capital gains tax of (10 million - 2.5 million) * 20% = 1.5 million won.

3. China's capital gains tax situation For China, the capital market is still a new thing, so unlike most countries in the world, China does not have capital gains tax. No matter how much money a person makes in the stock market by buying low and selling high, he does not have to pay taxes on the profits he earns, which also leads to the extremely active trading of China's A-shares.
In China, the tax that is closest to capital gains tax abroad is the real estate value-added tax. In the past two decades, China's real estate prices have grown rapidly, so when selling real estate, you need to pay more than 5% value-added tax on the added value. If it is a commercial house, the value-added tax is even higher. Since most of the Chinese wealth is concentrated in the real estate sector, just like most of the Americans' wealth is concentrated in the stock sector, the real estate value-added tax is the largest tax that taxpayers need to pay for asset appreciation.
Huo Xiaolu, the author of Wu Says Blockchain, also pointed out that taxes in China are paid in RMB. Most virtual currencies are denominated in US dollars. If you want to pay taxes, you must convert virtual currencies into corresponding US dollars and then convert them into RMB. This process involves both the pricing of virtual currencies and the issue of disguised exchange with legal currency. Both of these points are prohibited by the 94 Civilization Order. Therefore, under the current policy background, taxation is only a hypothetical issue. If you really declare it, the tax department may have a headache.
(Refer to whether buying and selling coins in the Chinese cryptocurrency circle requires taxation and whether it involves foreign exchange control)
Benjamin Franklin, the founding father of the United States, once said that in this world, only death and taxes are unavoidable. Therefore, in the United States, taxation has become an extremely complicated matter, and most people need to hire professionals to complete it. As a means of adjusting the gap between the rich and the poor and increasing social welfare, most societies will use taxation as a means. It can be foreseen that China's tax system will also be gradually improved. In terms of capital gains, it is very likely to levy taxes like the United States, Japan or South Korea. However, since the cryptocurrency market is not large compared to other fields, it is conceivable that it will take a long time for the introduction of capital gains tax on cryptocurrencies to appear.
(Refer to the latest US bill to unify the SEC and CFTC to have a stronger impact on cryptocurrency regulation)