Cryptocurrency Taxation and Regulatory Challenges

Adhikari, Prabin and Hamal, Prashamsa and Adhikari, Biplob and Maskey, Nirmal Kumar (2025) Cryptocurrency Taxation and Regulatory Challenges. International Journal of Science and Research Archive, 15 (3). pp. 778-788. ISSN 2582-8185

The rapid proliferation of cryptocurrencies has presented significant challenges to tax authorities and financial regulators worldwide. This study critically examines the legal, institutional, and regulatory frameworks governing cryptocurrency taxation across jurisdictions, focusing on the inconsistencies, loopholes, and enforcement difficulties that hinder effective compliance and oversight. The decentralized nature of blockchain-based financial systems, alongside the anonymity of cryptocurrency transactions, complicates traditional taxation and regulatory models. The primary objective is to identify and analyse the key regulatory challenges, evaluate legal frameworks in selected jurisdictions, and provide recommendations for policy harmonization and improved compliance mechanisms. Using a systematic literature review of 40 peer-reviewed articles from 2013 to 2024, this study synthesizes academic insights across legal, financial, and technological domains. Inclusion criteria focused on papers discussing cryptocurrency taxation, DeFi, AML, and regulatory policy analysis. The review reveals fragmented tax treatment, limited enforcement capacity, growing use of DeFi tools to evade compliance, and the lack of international regulatory alignment. Current regulatory models are outdated and jurisdiction-specific, making them ineffective against borderless crypto activity. The study recommends global regulatory harmonization, adoption of risk-based frameworks, public-private cooperation, and investment in regulatory technology and capacity building.