Tag: taxation

Crypto Regulations in 2019: What to Expect?

Bearing in mind the sensitiveness and volatility of the crypto market that we are witnessing right now, it can surely be said that next year regulators will stop being undetermined about crypto. Many countries, which have been implementing ambiguous and non-transparent policies so far, next year will likely take a holistic view of crypto.  So, what should we expect of 2019? Generally, governments will place due emphasis on two areas: taxation and investor protection. For the record, several countries like Poland and Japan already formulated crypto tax policies in 2018. In general, crypto regulations will become more widespread and harmonised. As you’ve already guessed, today we’ll talk about crypto and ICO regulations and how lawmakers are going to surprise the community in 2019.  Europe In October 2018, European regulators have explained that specific rules for crypto and ICO are on the way. Steven Maijoor, chair of the European Securities and Markets Authority (ESMA), said he was examining how ICOs fit into existing regulation and how they affect competition in the wider capital raising sector.  In addition, ESMA released a 2019 Annual Work Programme, which included a primary objective for the upcoming year:  “Achieve a coordinated approach to the regulation and supervisory treatment of new or innovative financial activities and provide advice to present to the EU institutions, market participants or consumers" Interestingly, the plans were revealed according to which ESMA is going to invest more than €1 million in order to develop a framework for overseeing cryptocurrencies and other fintech activities in 2019. However, in August 2018, the European Parliament’s Committee on Economic and Monetary Affairs published a proposal to impose new laws for ICOs in order to protect "consumers who are at risk from fraudulent activity taking place in this market". Speaking of taxation, French government recently claimed that it planned to boost its tax revenues by providing a regulatory cover for ICOs. It appointed a new tax force to draft regulations for ICO projects launching in the country. China  Turbulent approaches towards crypto have made China a hot topic for crypto community so far. However, in 2019 we should expect Chinese regulators to follow Japanese-like policies. An official from the Ministry of Industry and Information Technology in China recently confirmed that the authorities were working towards setting up national crypto-standards which would make decentralization and blockchain technology flourish. Li Ming, who is the director of the Blockchain Research Office at the standards institute under the Chinese IT Ministry, also revealed that a number of relevant government departments would be working toward establishing a nationwide ‘Blockchain and Distributed Accounting Technology Standardization Committee’. Malaysia  Malaysia is considered to be attractive for foreign investments as it has a highly diversified and robust economy. The country allows Bitcoin mining and trading with no restrictions.  However, the Central Bank of Malaysia recently issued a statement that Bitcoin is not considered to be legal tender and its users are poorly protected from fraudulent schemes and operational risks. The year 2019 is going to boost crypto development in Malaysian ‘hub’. According to local media, the government will enact regulations for cryptocurrency and ICOs in Q1 2019. This move is explained as a “part of the Securities Commission’s efforts to facilitate alternative fundraising avenues and new investment asset classes”. Looks like crypto investment flows are inevitable for Malaysia in the upcoming year.  World  Should we expect the international taxation in 2019? That is the question we all ask to ourselves. And it’s especially relevant in the context of recent meeting of G20 group leaders. In early December, they gathered in Buenos Aires to discuss global issues. One of the topics covered was cryptocurrency and how to regulate it in the best manner. According to the report, it is stated that G20 leaders are seeking to “build a taxation system for cross-border electronic services“. However, that’s controversial. While many are preparing their business for new taxes, others don’t even see any innuendo related to crypto. Gary McFarlane, a crypto analyst, thinks that it's not certain that the G20 focuses on crypto specifically:   "The G20 final communiqué doesn’t really add anything new. The statement in paragraph 26 of the communiqué talks about “the impacts of the digitalization of the economy on the international tax system”, but I think that has been misinterpreted by some as a call to tax cross-border transactions when in fact it is more a reference to finding solutions to global Big Tech corporations declaring their profits in low-tax jurisdictions". Most likely, in 2019 cryptocurrency will be losing one of its natural features – users’ anonymity. The pervasive AML and KYC procedures will be carried out in order to prevent money laundering, terrorist funding, exit scams, etc. However, if we want to operate in a stable and mature environment, we all have to make sacrifices. 

Articles/December 20, 2018

Crypto Taxation around the World: from Germany to Japan

Do you pay taxes for using crypto? Or let’s better rephrase the question: do you know that you must or must not pay taxes for using crypto in your country?  If you do – and we are confident you do, still, this article is something you should not skip. Taxation is becoming one of the principal issues, when it comes to cryptocurrencies, as every country differs in its policies and approaches. Today we’ll examine which countries could be lauded as ‘tax havens’ for crypto owners and in which ones you will be taxed for a full ride. Buckle up, ladies and gentlemen, our trip across taxations is in high gear. Germany  Federal ministry of finance Germany Source:  Federal Ministry of Finance, photo: Ilja C. Hendel Germany is positioning itself as one of those European countries that have business-friendly tax policies. It has become a true shelter for both mid-term and long-term crypto investors. Here trading crypto is considered as a private sale under the rule 23 EStG which implies tax-free benefits. According to this document, trading cryptocurrencies is totally tax exempted, provided that your capital gains are not more than 600 EUR. The punch line is that in Germany digital currencies are not considered as a commodity, a stock, or any kind of currency. Instead, since 2013 they are recognised by the German Finance Ministry as private money in a way that’s similar to foreign currency. Interestingly, profits made through any kind of operation with crypto (e.g. mining, trading, exchanging) are subject to a capital gains tax (which is 25-28 percent, by the way) including a solidarity surcharge. According to the German Income Tax Act, if the assets are held for more than one year, they become tax exempt. Poland  President of Poland Andrzej Duda Source: Profil Prezydenta RP Andrzeja Dudy   A legal framework in Poland has been dramatically changing so far. In April 2018, the government decided to tax crypto investors on each and every crypto transaction they were involved in. The country’s government bound citizens to declare all their crypto and exchange gains. This far-fetched tax was too heavy for crypto owners. That’s why the government decided to backtrack it and commenced the establishment of a new well-thought-out one. Polish community had to wait for almost 3 months. In August, regulators in Poland have come forward with a long-promised Crypto Bill. This regulation, as government believes, will enable it to keep a strong focus on the illegal activities which are carried out in the guise of cryptocurrency transactions. The crypto taxation was officially released on 24th August 2018. Additionally, in mid-November, the Income Tax Department of the country has suggested President Andrzej Duda’s government to levy a steep tax of 19% on income from using crypto. If enacted, the taxation is expected to come into force from January 2019. USA  Internal Revenue Service Building on Constitution Avenue in Washington, D.C. Source: Wikimedia  The whole story with crypto-taxes in the US began in 2014 when the Internal Revenue Service (IRS), the country’s government agency that collects taxes and enforces tax laws, issued the general guidance on how cryptos are taxed. According to the guidance, in the US “virtual currency is treated as property”. It also says that crypto-taxes are calculated individually for every taxpayer who uses crypto and they depend on the coin’s value as of the date it was traded: A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in dollars, as of the date that the virtual currency was received” As of today, by the look of things, Internal Revenue Service is not going to be soft with crypto owners. In February 2018, Coinbase, a San Francisco-based digital currency exchange, sent an official notice to about 13,000 customers, informing them that their data is being handed over to the IRS per their request. The IRS is also famous for using software designed to track crypto tax cheats.  Agency periodically sends emails to crypto holders, reminding them to pay their taxes and even published a memo, highlighting the “inherently pseudo-anonymous aspect” of crypto transactions. Japan  The Ministry of Finance Japan Source: Japan Times  Japanese crypto holders seem to be operating in a crypto-paradise, but it’s not that simple. Although country recognises the crypto as a legal means of payment, the main reason behind this move to legalization is to ensure tighter oversight from the Financial Services Agency of Japan over the virtual economy.   In Japan, cryptocurrency investors must pay between 15 and 55 percent taxes on their profits declared on their annual tax filings by the end of the year. Judging from the statistics which shows that the trading pair BTC/YEN is one of the most popular, we can safely say that the country will receive large revenues from taxing crypto. Speaking of the latest news, in early December, Japan’s government announced that it prepared a new system that would allow the National Tax Agency (NTA) to obtain data from transaction intermediaries – crypto exchanges. A new regulation is expected to come into force in late 2019.  According to several sources, this will be the case for those crypto owners who earned over 10 mln yen ( ̴$88,700) from crypto transactions.

Articles/December 18, 2018

Kazakhstan, Uzbekistan and Kyrgyzstan: Middle Asia has entered the Game

Have you noticed how many countries, which have never really been ‘hyped’ in terms of crypto adoption and financial development, are now considered to be blockchain technology hubs? Estonia, Slovenia, Belarus...the list is permanently expanding.  Now, it would seem that it's time for the countries of Middle Asia to enter the game. While many of the so-called 'big boys' adopt a fairly cautious approach to the regulation of cryptocurrencies, several Asian countries - including Kazakhstan, Uzbekistan and Kyrgystan - seem happier to implement more supportive, optimistic laws and regulations. However it’s not just local regulators, but local banks too, which have become aware of the need for blockchain adoption. After reading this article you’ll definitely have learnt something new about this Central Asian trio, as they attempt to position themselves at the forefront of blockchain technology adoption. So, let’s get this ‘crypto journey’ started.  Kazakhstan  Kazakhstan is trying to become the region’s main crypto hotspot. In May, Kazakhstan’s President Nursultan Nazarbayev called for global cooperation on crypto regulation. At the plenary session of the Global Challenges Summit 2018 he stated the following:  “We see completely separate actions of states in this issue[cryptocurrencies]. And these disparate actions will lead to inefficiency. It is necessary to start developing common rules.” The blockchain hype hasn't passed by Kazakhstan’s Ministry of Finance either, who has started researching blockchain. In April, he announced the launch of a blockchain-powered database that will be designed to eliminate ‘grey schemes’.   Furthermore, in June 2018 Kazakhstan hosted one of the largest conferences dedicated to distributed ledger technology - the Blockchain Conference Astana - which was supported by public authorities and the Kazakh Association for Blockchain and Cryptocurrencies (KABC). 25 speakers from the UK, USA, Canada, Russia, Belarus and Kazakhstan, as well as over 200 participants from various sectors of the economy discussed the hottest industry topics, including the prospects for decentralized technologies in Kazakhstan. Uzbekistan  Recently, Uzbekistan’s government introduced a number of supportive regulations. The country now legally recognizes crypto trading and mining, while providing local crypto traders with exemptions from taxation.  One of the latest crypto laws enacted in Uzbekistan was a decree dedicated to building a digital economy, two key facets of which are the adoption of blockchain technology and the development of a friendly regulatory environment for crypto. Signed by the country’s president Shavkat Mirziyoyev in July, the law came into force on September, 2.  Local media Gazeta.uz recently published the key goals mentioned in the decree. They are as follows: To adopt and develop cryptocurrency-related activity, including mining, issuance, exchange, storage, distribution, management, and consulting related to virtual currencies. To implement blockchain technology, smart contracts and to support ICOs in order to diversify the various methods of investment and entrepreneurial activities. To train blockchain developers; to cooperate with entities from foreign crypto and blockchain markets; to attract international experts in order to build and implement joint projects with local firms.  To create a legal framework for blockchain considering the best practices of crypto-friendly countries.  Massively significant, isn’t it? And that’s not all - in September, President Mirziyoyev also ordered the establishment of a state blockchain development fund named "Digital Trust". The fund's principal aim is to integrate blockchain into local industries including healthcare, education, and cultural areas. Kyrgyzstan Interestingly, Kyrgystan is one of those countries which were initially against cryptocurrency. It banned cryptocurrencies back in July 2014, following the National Bank’s statement warning that the use of virtual currencies is illegal.  But fast forward to today and Kyrgyzstan is one of the most financially developed and crypto-friendly countries in the region. A report, published by the law firm John Tiner & Partners on behalf of the country’s International Financial Center Development Agency (IFCDA), demonstrates that the nation is now proposing more accommodative approaches. According to the report, there are almost no restrictions in Kyrgyzstan when it comes to crypto trading and mining. ICOs are also allowed to be deployed freely in the country. The only restriction is that those involved in the crypto trading must pay established taxes. Valery Tutykhin, head of the IFCDA, stated:  “Our local investment market infrastructure can be used to legally invest into any crypto-assets. Does someone want to buy cryptocurrencies? Let him do it through the local commodities exchange, considering that he will pay local taxes. Does someone want to raise capital for a startup through an initial coin offering? Let him do it through the local stock exchange. Its listing rules are not so complex”. These countries are a textbook example of how a nondescript region can become an epicenter of blockchain development, without hype and often while going unnoticed. It is hoped that the absence of regulatory uncertainty in the aforementioned countries will give crypto and underlying decentralized technologies a powerful impetus in this region.  As promised, our next article will be dedicated to the ‘big boys’, including China, the US and the UK. Stay tuned! 

Articles/October 18, 2018