Abstract

The rapid emergence of cryptocurrencies has significantly altered global financial systems, presenting both opportunities and challenges for national revenue mobilization, particularly in emerging economies. This study critically examines the influence of cryptocurrency taxation models on national revenue generation, with a focus on how governments can effectively adapt traditional tax systems to accommodate decentralized digital assets. Drawing on tax theory and financial regulation frameworks, the study explores key issues such as tax compliance, regulatory capacity, and the complexities arising from the pseudonymous and volatile nature of cryptocurrency transactions. A mixed-method approach was adopted, combining qualitative insights from literature and expert interviews with quantitative analysis using a multiple regression model. Data were obtained from selected emerging economies, incorporating variables such as tax compliance rates, cryptocurrency adoption levels, and the type of taxation model implemented. The findings reveal that tax compliance and cryptocurrency adoption have significant positive effects on national revenue generation. Notably, transaction-based taxation models were found to outperform income-based approaches, contributing substantially higher revenue yields. The study concludes that while cryptocurrencies pose regulatory and enforcement challenges, they also offer a viable avenue for expanding the tax base, particularly in economies with large informal sectors. Effective policy frameworks that enhance compliance and leverage transaction-based taxation can enable governments to harness the revenue potential of cryptocurrencies. The paper recommends that policymakers in emerging economies adopt proactive and adaptive taxation strategies to optimize the benefits of digital financial innovations while mitigating associated risks.