EU To Force Crypto Companies To Report Their Users' Holdings To Tax Authorities
EU To Force Crypto Companies To Report Their Users' Holdings To Tax Authorities
Authored by BTCCasey
via BitcoinMagazine.com, December 11, 2022
The
European Union indicated Thursday that it will make cryptocurrency companies
report their European users’ holdings to tax authorities.
The proposed eighth Directive on Administrative Cooperation was
previously reported on by CoinDesk,
and could have wide-reaching implications including forcing non-EU based
companies to have to register with tax entities there.
In a statement, the EU Commissioner for tax, Paolo Gentiloni said, “Anonymity
means that many crypto-asset users making significant profits fall under the
radar of national tax authorities. This is not acceptable.”
The enforcement of the measures was not made entirely clear, as
the cryptocurrency industry has various entities and actors residing in various
jurisdictions, including some who claim no base of operations. Beyond that,
there should be concern for the honeypot of user data that registering user
holdings creates. Often, holdings on centralized exchanges (which are dangerous
in their own right) are paired with sensitive identifying
information which could potentially be used by criminals to attach people to
their holdings.
There have been various cases of documented data leaks in
and outside of the cryptocurrency
industry: and these are simply the ones that surfaced. Forcing
companies to provide European tax authorities — including companies based
outside of the EU — once again forces firms to collect copious amounts of data
exposing user holdings, and then transmit them to tax authorities in Europe
whom they must trust to keep them safe.
Concerns
have also been voiced that this could have ramifications for the EU’s Markets
in Crypto Assets Regulation (MiCA) which is the “first all-encompassing effort
to tackle cryptoassets and brings rules contained in Mifid, Market Abuse and
the Prospectus Regulation to the cryptoasset industry,” according
to the International
Financial Law Review (IFLR).
The European Crypto Initiative made a statement indicating it was “concerned
that it would apply to a far wider range of obliged entities and individuals”
than MiCA.
The EU
has said it believes the move could generate as much as $2.5 billion (2.4
billion euros) through the introduction of the directive.
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