Taxation of Cryptocurrency: In a Danish Perspective

Alexander Skaastrup Egelund, Carl Johan Vingtoft Andersen & Mads-Ulrik Kirkebæk

Student thesis: Master thesis


For many years, the traditional comprehension of money and currency has involved some kind of physical element. However, technology has in the last couple of years disrupted this traditional belief of physical money and the rapid development in the digital economy has made it possible to create a completely new type of decentralized digital currency. The current traditional tax rules are not aimed at utilizing this new technology. As a result, cryptocurrencies might be taxed inefficiently. The analysis states, that cryptocurrencies can be categorized into five categories containing coins, asset tokens, derivative tokens, equity tokens and utility tokens. These different kinds of cryptocurrencies have unique characteristics, which in some cases are essential to distinguish from, in relation to the tax wise qualification. Coins, asset tokens, derivative tokens, equity tokens and utility tokens are tax wise classified as capital goods and entail a differentiated taxation compared to products with similar application potential and properties. It was furthermore shown that cryptocurrencies, in some cases, were more efficient than traditional payment solutions. The transaction costs were significantly lower especially in relation to international transactions. The usage of cryptocurrencies would also create an economic state closer to perfect competition and, therefore, reducing the deadweight loss. Finally, it was concluded that the existing taxation on cryptocurrencies creates an economic inefficient state demanding for an appropriate solution. Three different solutions containing a proposal by the Danish Ministry of Taxation, an alternative solution existing of creating a completely new law and a status quo-situation were analysed and compared to each other. It was found that creating a new law was the most advisable solution to address the differentiated taxation in order for the use of cryptocurrencies to flourish. The solution would also provide a Kaldor Hicks-efficient state. Based on the above, the development in the digital economy i.e. cryptocurrencies in Denmark, demands a new and more efficient tax legislation which allows the advantages of cryptocurrencies to be fully utilized.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
Publication date2018
Number of pages220
SupervisorsLouise Fjord Kjærsgaard