Argentina, under the leadership of pro-Bitcoin President Javier Milei, is considering a bill aimed at simplifying the process of legalizing cryptocurrency holdings, even for those with outstanding tax liabilities.

The proposed legislation seeks comprehensive reforms, granting President Milei expanded legislative powers to act directly across various domains, bypassing the traditional parliamentary route. 

“The proposal is aimed at generating freedom for economic development. It was essential to get this out quickly. The tax part was smaller and delayed treatment.” Guillermo Francos, minister of interior, said.

The bill, “Law of Bases and Starting Points for the Freedom of Argentines” introduced to Congress on December 27, includes a pivotal provision known as the "asset regularization scheme."

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Asset Regularization Scheme

Under the proposed scheme, taxpayers would have the opportunity to legalize their crypto assets without the burden of extensive documentation regarding their origin. The tax determination process entails a progressive tax rate structure:

• Declaration by March 2024: 5% tax rate
• Declaration from April to June 2024: 10% tax rate
• Declaration from July to September 2024: 15% tax rate

The initiative marks a departure from Argentina's conventional tax framework and aims to simplify the integration of cryptocurrencies into the country's financial system.

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Tax Implications and Regulatory Framework

In Argentina, while merely holding cryptocurrencies does not incur tax obligations, any gains realized from selling them are subject to taxation. The Argentine Tax watchdog, AFIP, classifies cryptocurrencies as financial assets, necessitating tax payments proportional to the asset's market value as of December 31 each year.

President Milei's pro-crypto stance has been evident since his election victory, with pledges to embrace Bitcoin and decentralization. However, concrete regulatory changes have yet to materialize, despite indications of forthcoming decrees allowing Bitcoin usage in the country.

While the bill represents a significant step towards crypto-friendly policies, it is still in flux and subject to parliamentary consensus.