Auto Added by WPeMatico
US senators Lummis, Gillibrand reveal working on bipartisan crypto legislation
Senator Cynthia Lummis has won support from a Democrat senator for her new digital asset bill.
United States Senator from New York Kirsten Gillibrand revealed working with Senator Cynthia Lummis on a broad-based regulatory framework for the crypto industry on Thursday during a live event in Washington, D.C.
As Gillibrand specified, she and Lummis are undertaking “a very complex and intensive review” of different aspects of the industry, with a future regulatory task-sharing in mind. The framework will see both the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) get their share of a regulatory mandate.
Speaking of her and Lummis’ motivations for taking up the initiative, Gillibrand said:
“Many of the goals that Sen. Lummis and I have are identical — we want to address things like safety and soundness, we want to address consumer protection, we want to address certainty for markets.”
The symbolic importance of the Lummis-Gillibrand initiative is hard to overstate. In recent months, digital assets have been increasingly politicized, with some observers fearing that it could eventually become a divisive partisan issue.
Related: Democrat division over crypto isn’t all bad news for regulation
Senator Lummis gained a reputation as a staunch advocate of financial innovation, while Senator Gillibrand has largely refrained from articulating her stances on digital currencies until recently.
Back in December 2021, Lummis announced the introduction of a crypto bill that would provide regulatory clarity on stablecoins, offer consumer protection and categorize different digital assets. Along with the announcement, she issued a call for bipartisan cosponsors, which, as can be told now, has caught the attention of Senator Gillibrand.
The bipartisan legislative push comes weeks after U.S. President Joe Biden signed his executive order on digital assets, directing a number of federal agencies to produce a series of reports on digital assets.
‘US Government does not stand for freedom’: Bukele reacts to US bill passing Senate committee
The bill would direct federal agencies to scrutinize how El Salvador implements its Bitcoin law.
El Salvador president Nayib Bukele reacted to the news that the recently proposed Accountability for Cryptocurrency in El Salvador Act (ACES) had passed the U.S. Senate Foreign Relations Committee and will now head to a full Senate vote. The 40-year old national leader responded emotionally on Twitter:
Never in my wildest dreams would I have thought that the US Government would be afraid of what we are doing here. pic.twitter.com/QgJPa70mn0
— Nayib Bukele (@nayibbukele) March 23, 2022
On Wednesday, March 23, the Senate Foreign Relations Committee approved the bill, sponsored by Senators James Risch, Bill Cassidy, and Bob Menendez. The Committee granted a pass to S. 3666 (ACES) bill that is supposed to “mitigate risks related to El Salvador’s adoption of Bitcoin as legal tender”, and to S. 816, “legislation to recalibrate the State Department’s risk tolerance abroad”.
Related: El Salvador’s Bitcoin Law: Understanding alternatives to government intervention
The ACES was first introduced on Feb. 16, 2022. In case securing the approval of the full Senate, it will require the federal government to assess the enactment of Bitcoin law in El Salvador and determine whether the nation can “mitigate the financial integrity and cyber security risks” and meet Financial Action Task Force (FATF) requirements. After 60 days of assessment, the agencies should come up with action plans.
Immediately after the introduction of the ACES in February, Bukele demanded that the U.S. “stay out” of El Salvador’s domestic affairs. “The US Government DOES NOT stand for freedom and that is a proven fact”, — Salvadoran leader claimed this time.
The date of the ACES vote in the U.S. Senate is yet to be determined.
Colorado accepts tax payments in crypto: Was it just a matter of time?
Colorado is set to accept tax payments in crypto. To some experts, it’s only a matter of time before other U.S. states follow suit.
The governor of Colorado, Jared Polis, announced in February that the state government plans to allow residents to pay taxes in cryptocurrencies as early as the summer of 2022. To some experts, the move is both legitimizing for the crypto asset class and was expected to come in due time.
In an interview, Polis said crypto holders in Colorado could have the option of sending tax payments in digital currency, with the state converting the funds back into fiat as soon as the payments were received through an unnamed intermediary.
Colorado is already a leader in Crypto with our first in the nation Chief Blockchain Architect, hosting ETHDenver and other blockchain hackathons. It was great to sit down with CNBC to discuss the initiatives Colorado is taking on cryptocurrencies. pic.twitter.com/p5WtlF2E0r
— Governor Jared Polis (@GovofCO) February 17, 2022
Polis added that after the rollout this summer, the state could accept cryptocurrency payments for things “as simple as driver’s license or hunting license” within a few months. The governor said at the time he was “not at all” concerned about the potential volatility of cryptocurrencies like Bitcoin (BTC), given the state does not plan on holding the coins for long.
Shortly after taking office in 2019, Polis signed the Colorado Digital Token Act into law, aiming to exempt tokens with a “primarily consumptive purpose” from some securities regulations. The governor also said that State Senator Chris Hansen was working on a bill that would “allow state-created digital tokens to be utilized for state reserve purposes.”
Speaking to Cointelegraph, Senator Hansen said the bill “introduces extra security, saves on costs, diversifies the pool of investors, and the potential to lower interest rates paid by the state.” Hansen said:
“We need to ensure that every Coloradan can equitably participate in and benefit from investment in our state. By expanding beyond institutional investors and commercial banks, we invite millions of Coloradans to share in the financing of new capital assets.”
The senator stated that he is looking forward to seeing how the state will help “communities rebound from the pandemic, improve their quality of life, and address inequities that have kept everyday folks from fully prospering from our economy.”
Money as a representation of debt
Money was initially concocted as a physical representation of debt, according to anthropologists such as the late David Graeber. Governments, Graeber pointed out, utilized money to standardize the payment of tributary obligations and facilitate the maintenance of their workers.
Speaking to Cointelegraph, Brian Pasfield, chief technology officer at Fringe Finance — a decentralized lending platform — cited Graeber’s work to suggest cryptocurrency is being legitimized by moves like Colorado’s. Pasfield said:
“Seeing governments recognizing cryptocurrencies as a viable medium of payment for taxes speaks lengths about a mindset change in the way we view these currencies.”
Pasfield added that accepting crypto for tax payments will “inevitably lead to governments having to manage and hold these currencies within their Treasuries,” which can help reduce the volatility crypto assets are known for.
He added that if a large federal government like that in the United States were to finalize the regulation of cryptocurrencies, it would be a logical step for it to “accept [cryptocurrencies] as a legitimate form of one of the oldest social technologies: money.”
Russel Starr, CEO at DeFi Technologies — a technology company with products for investing in decentralized finance — told Cointelegraph he believes a government’s treasury should be denominated in the currency it uses to pay for services, meaning that if it’s going to pay employees in dollars, its crypto income should be converted to dollars.
However, Starr said that any entity should “have diversified investment holdings,” which should “absolutely include cryptocurrency and other decentralized financial products.”
Per the CEO, the “growth potential of cryptocurrency would make it an attractive asset in any carefully balanced portfolio, especially in that of the Mile High State.” This growth potential could also mean that governments accepting cryptocurrency for tax payments was a long time coming.
Governmental adoption “only a matter of time”
In February, California State Senator Sydney Kamlager introduced a bill that would amend the state’s code in order to accept cryptocurrencies for certain civic payments.
The bill proposed authorizing a state agency to “accept cryptocurrency as a method of payment for the provision of government services.” Back in 2018, Ohio became the first U.S. state to accept Bitcoin for taxes but dropped the crypto tax payment program in 2019, citing legal issues.
Jaideep Singh, co-founder and CEO of artificial intelligence tax engine firm FlyFin, told Cointelegraph cryptocurrencies are slowly getting regulated. Per Singh, crypto regulations started with reporting on crypto transactions for U.S. tax filers before government agencies shifted to tracking cryptocurrency transactions.
Tracking cryptocurrency transactions reduces their anonymity and “furthered a trend that we will see over the next several years” involving more transparency, tracking technology and increased regulatory requirements for crypto:
“It is the responsibility of governments to make sure that its citizens are not defrauded, criminal activity is curtailed, and that taxes are not being circumvented. So, this new development happening in Colorado was only a matter of time.”
Singh sees the U.S. leading the world when it comes to cryptocurrency acceptance, with other countries following, as “we will almost certainly see the adoption of blockchain and other cryptos by central banks.”
Ben Weiss, chief operating officer at Bitcoin ATM operator CoinFlip, told Cointelegraph he believes Colorado’s move will “likely create a chain reaction, with other states in the country following suit — especially if the rollout goes as planned.” To Weiss, this could be a “major step towards consumers recognizing crypto as a legitimate form of currency.”
Weiss added that the move could further boost cryptocurrency use cases among government services:
“This advancement may also encourage crypto transactions to be implemented in other places statewide, such as at a local DMV [department of motor vehicles]. This is a great opportunity for Colorado to build its reputation as a tech hub and mark its place on the forefront of a digital revolution.”
Weiss said that U.S. states could consider holding crypto assets because of their potential to appreciate, as the extra money gained through it can “be utilized to improve roads, clean parks, and help finance other underfunded areas of the local government.”
Speaking to Cointelegraph, Patrick White, co-founder and CEO of crypto asset tax and accounting software provider Bitwave, said he loves seeing states such as Colorado and California moving to accept crypto for taxes but “not for the reason one might think.”
White added that working with crypto assets requires “muscle memory; it requires understanding how to on-ramp and off-ramp, learning to do the tax and accounting, figuring out custodianship, and more.” He added:
“It’s a huge step for the industry that multiple states are having to really understand crypto, makes rules around pricing digital assets for real tax purposes, and more.”
Weiss hopes the U.S. federal government is next in line and that government bodies end up keeping “some of the assets on the balance sheet instead of just selling it right off.”
Even if governments do not keep crypto assets on their balance sheets, demand for cryptocurrencies that they accept as payment could surge. One way demand for fiat currencies is maintained is through their use in tax payments: People need to hold fiat so they can meet their tax obligations at the end of the month or year.
If cryptocurrencies are to be used to pay for taxes, the need to hold fiat currencies is greatly affected, even more so because paying for goods and services with crypto is becoming increasingly easier with the use of crypto debit cards.
Tax man: India’s new tax policies could prove fatal for crypto industry
India’s crypto tax policy is set to become law on March 24. However, stakeholders believe it could eradicate small-time traders and derail the thriving industry.
Indian crypto tax policy has become the hottest topic for Indian crypto traders and exchange operators as it is set to become law on March 24 and will come into effect starting on April 1.
The proposed 30% crypto tax is the highest in the country and is equivalent to the tax imposed on gambling and lottery tickets. While the high tax bracket was already a cause of concern for many new and small traders, a recent clarification from the government has made things even more complicated for the Indian traders.
The parliamentary clarification on March 22 indicated that each crypto trading pair would be independently considered and traders can’t offset their losses against profit on another trading pair. This means if a trader invests $100 each in two tokens and incurs losses on one investment while making a profit on another trade, they would have to pay taxes on their profitable trade without accounting for the losses.
Nischal Shetty, founder of WazirX crypto exchange, told Cointelegraph, “As per response by P.P. Chaudhary in the parliament today, investors will not be able to offset losses from one crypto trading pair by gains from another type. Moreover, it also mentions that the mining infrastructure costs will not be included in the cost of acquisition to be claimed as a deduction.”
“Treating profits and losses of each market pair separately will discourage crypto participation and throttle the industry’s growth. It’s very unfortunate, and we urge the government to reconsider this.”
Previously, a 1% transaction deduction at source (TDS), which was supposed to come into effect on June 1, was the primary concern for crypto entrepreneurs and exchange operators, as they believed a 1% TDS on each crypto trade would dry up liquidity on exchanges.
If you start with a capital of RS 51000, by trade no 11 – 10% of your capital will be locked as TDS and 50% by trade no 69.
— Aditya Singh (@CryptooAdy) March 24, 2022
However, many believe that this recent clarification about traders not being able to offset their losses against gains could potentially kill the nascent industry.
Akash Girimath, a crypto trader and technical analyst, told Cointelegraph that a 30% tax bracket might not be that bad of a thing, given the crypto market is still volatile and prone to scams. He said a high tax barrier would help discourage “unbeknownst investors from diving headfirst into cryptocurrencies.”
In light of the news about offsetting losses, however, Grimath believed it would not be a wise tax model, stating, “If the recent reports about the crypto tax bill are true and if traders cannot offset their losses from one crypto by gains from another or vice versa, will definitely discourage traders from reporting their gains.”
“The regulators need to understand that it is not hard to skirt the law, especially with the recent interest in Web3 and the rise of decentralized exchanges and mixers. It will be interesting to see how the Indian watchdogs plan to curb or regulate and tax the decentralized finance space.”
Grimath said that from a trader’s standpoint, the 30% tax isn’t as scary as the 1% TDS. He stated that if the TDS is levied on crypto transactions, it will be a massive blow to traders. But, if it is applicable only at on/off-ramps, then it will make life much easier for crypto traders.
Another crypto trader, who preferred to remain anonymous, bashed the recent government policy and said it sends out the wrong message to entrepreneurs in the country. Talking about the high 30% tax bracket, he said:
“It will impact adversely. It’s not a system that embraces or accepts crypto, it’s a crypto penalty tax and a desperate measure to earn extra tax income. Nothing has affected the crypto ecosystem to date and the crypto tax is nothing new. People always find better ways to be in crypto.”
Namish Sanghvi, crypto trader and entrepreneur, suggested traders should sell all their holdings before April 1 and start fresh. He also acknowledged that if the crypto tax policy is made into a law, “trading will be entirely stopped. Only investing for a longer-term is being encouraged.”
My suggestion to sell off everything applies to those who are in overall profit. That way you can still offset your losses with profits before March 31.
If you’re only in profit, or only in loss across all your investments, then it’s wise to just hold! https://t.co/4RxKH8xKOT
— Naimish Sanghvi (@ThatNaimish) March 21, 2022
High crypto taxation policies have failed around the world
India is not the first country to propose a high crypto tax policy. The Southeast Asian nation of Thailand previously proposed a 15% tax on crypto gains but faced a wave of criticism from small and retail traders in the country. As a result, the government not only scrapped the 15% crypto tax proposal it also exempted traders from the 7% mandatory value-added tax for trading on regulated exchanges.
South Korea, which is known for its strict regulatory policies, proposed a 20% tax on crypto gains above 2.5 million Korean won. Due to the lack of clear regulations around the crypto market, however, lawmakers postponed the high tax proposal by one year.
Conversely, Singapore, one of the fastest-growing crypto hubs in Asia, does not have a capital gains tax on crypto at present, although it does have a nonfungible token (NFT) trading tax introduced in March 2022. The country is also one of the most evolved in terms of crypto regulations.
In Portugal, cryptocurrencies are only taxable if done as a professional trading activity. While the country follows European Union guidelines on digital asset regulations, the policies in the country encourage traders and investors with tax-free crypto earning policies.
The Indian government, on the other hand, seems to be more determined to discourage people from getting into crypto with its regressive policies. Despite growing outrage, the government has failed to establish a dialogue with stakeholders of the thriving crypto industry in the country.
Varun Sethi, Indian tech lawyer and a crypto enthusiast, told Cointelegraph that the first logical step should be setting up a regulatory authority for cryptocurrencies quite similar to what Dubai, Singapore, Australia and the United Kingdom have done. He also acknowledged that comparing the crypto law of Singapore, Dubai, Hong Kong and the United States with India may not be completely fair since these countries don’t exercise capital controls.
The Indian crypto ecosystem has thrived over the years despite uncertainty on crypto regulations and regular calls for a blanket ban by the Indian central bank. India has produced several crypto unicorns such as WazirX, CoinDCX and CoinSwitch over the past couple of years. Many more foreign investors have been eagerly waiting for better regulatory clarity to invest further. However, the latest tax policy poses a severe threat to the years of infrastructure developed by crypto firms.
Mohammed Danish, chief legal officer at BitDrive Exchange, told Cointelegraph that the government’s policies would push traders to look for alternatives and may force them into gray markets:
“The Government is axing its own foot by introducing such punitive tax rules on crypto trading and investments. Indian crypto exchanges use Know Your Customer processes before allowing any person to trade on their platform with government authorities using this KYC data to trace down the miscreants for law violations. Now, this newly proposed tax rule of 30% rate, coupled with 1% TDS and no allowance for setting off trading losses, is likely to drive away crypto traders to gray markets and will prove detrimental for the crypto exchanges, which are eyes and ears of the government during legal investigations.”
India has shown great potential in the fintech industry, as a significant number of crypto projects have Indians in key roles. Killing the nascent industry with an impractical tax policy would only lead to brain drain. India cannot afford to miss on the crypto boom as it did during the late 90s and early 2000s dot com boom, and only better and inclusive policies could help them achieve that.
Russian Law Requires Election Candidates to Disclose Their Crypto Assets
Proposal for crypto tax policy in India will go to parliament on March 24
First announced by India’s finance minister in February, the amendment to existing laws proposed a 30% tax targeting digital asset transactions.
A tax proposal on crypto from India’s Finance Minister Nirmala Sitharaman may be closer to becoming law as the country’s lower house of parliament is scheduled to consider the legislation on Thursday.
According to a Wednesday publication, Sitharaman will be introducing appropriation and finance bills for 2022 to the Lok Sabha — the lower house of parliament — on March 24. The Finance Bill includes an amendment to the country’s income tax laws identifying “virtual digital assets” — including cryptocurrencies and nonfungible tokens — as taxable investments.
First announced by the finance minister in February, the amendment to India’s existing laws proposed a 30% tax targeting digital asset transactions. Sitharaman added at the time that losses incurred from crypto trading would likely not be able to be used to offset taxes from any profits. In addition, no deductions would be allowed while calculating income “except the cost of acquisition.”
Under this tax calculation, traders would likely have to pay 30% taxes on gains from cryptocurrencies including Bitcoin (BTC) and Ether (ETH), but not account for losses should the price of the coins fall. Cointelegraph reported that many experts criticized the proposal, which will likely go into effect April 1 following discussion on Thursday.
If you made loss in Bitcoin, you cannot set it off with profit in Ethereum. The new taxation law was clarified in parliament today.
My suggestion is to sell everything you have before March 31, 2022. And start fresh from April 2022.
Cost of mining cannot be deducted too! pic.twitter.com/pfSGPAOFBO
— Naimish Sanghvi (@ThatNaimish) March 21, 2022
The Finance Bill 2022 will be discussed & passed soon.
We urge the government to reconsider these new unfair tax policies & hope they make amendments to tax it like technology, not gambling. #reducecryptotax #ReduceCryptoTaxDay49
— Aditya Singh (@CryptooAdy) March 23, 2022
The tax policy on crypto is seemingly a legislative substitute for a previously proposed bill that would have banned “private cryptocurrencies” in India. According to the Lok Sabha’s most recently published list of business, India’s parliament is not scheduled to hear discussion on the crypto bill during its budget session, which ends April 8.
Related: India’s crypto tax provides little legal clarity for traders and exchanges
With a population of roughly 1.4 billion, India has not established a concrete regulatory framework for digital assets following the country’s supreme court decision in 2020 to lift a ban from the Reserve Bank of India on banks’ dealing with crypto firms. The tax proposal under consideration seems to be the closest crypto markets have been to gaining some sort of legal status in India.
‘Satoshi Island’ crypto utopia receives 50K citizenship NFT applications
A crypto island in the South Pacific where fiat is not allowed is making waves: Modular homes under construction, NFT citizenship applications and a promise of a decentralized future.
Step aside, El Salvador, there’s a new Bitcoin-centric destination on the map. As a 32-million-square-foot private island sanctuary in the remote South Pacific, Satoshi Island is a “place for the crypto community to call home.”
A combination of honeymoon getaway, Bond-villain hideout and naturalist paradise, there’s one enigmatic exception to Satoshi Island: it’s 100% crypto. Talking to Cointelegraph, the Satoshi Island team of Denys Troyak, James Law, Taras Filatov and Benjamin Nero mentioned that it is:
“A true crypto-economy where everything will be paid for in crypto and all ownership on the island is represented with NFTs.”
With its name inspired by the creator of Bitcoin (BTC), Satoshi Nakamoto, the team added that “the island intends to host events all year round, house and headquarter crypto projects as well as being a gathering place for crypto enthusiasts worldwide.”
Further down the road, the island could “operate as a decentralized autonomous organization.” To date, they’ve bought an island, secured build permits and reached a milestone of 50,000 visa nonfungible token (NFT) applications to become permanent crypto residents. An NFT marketplace is currently hush-hush.
The creation of a crypto utopia may seem unassailable even for the ambitious crypto community. Still, the founders have already received “50,000 applications for our free Citizenship NFT, acting as a whitelist to enter our Land NFT sale, while also permitting the holder to live on the island with many other benefits.”
Every home will be an NFT, or a “Satoshi Island Land NFT,” which can be traded. For the traditionalists, NFT holders can “turn their digital rights into physical documentation on the official land registry of Vanuatu.”
Unlike famous flops such as Fyre festival or CryptoLand — or any other failed fantasy project from an overly enthusiastic team of venture capitalists — Satoshi Island has mapped out a strategy, ticking off key developments in an orderly fashion. The team scoured the globe to choose a location, respected the legal process and avoided paid marketing or influencer campaigns.
Watch our video & see how we’re turning a dream into reality!
Yes, we already own the island
Yes, we can develop as advertised
Yes, the government supports our plan
Yes, our team has relevant expertise
️#satoshiisland a home for crypto enthusiasts & professionals worldwide! pic.twitter.com/1O05kmfrN1
— Satoshi Island (@satoshiisland) January 27, 2022
The Satoshi Island vision began during the 2017 bull run, as the “concept started out as an idea to have a place for the crypto community to call home and the actual island was chosen years after.” In fact, “it took many years to find the right island and to get everything together to be able to release to the public.”
First, the island had to be remote enough for privacy but not so remote that development would be too difficult. Second, the island should not be at risk of climate change and be protected from natural disasters. The slog to find an adequate location was compounded by the knowledge that, while it was “undoubtedly exciting” to pore over the world in search of an island for sale, they “had to be realistic.”
“This project started out as a crypto project looking for an island, not an island looking to become crypto city.”
Plus, the government managing the territory must be “open to the idea of a crypto city.” Finally, after years of searching, the team was onto a winner with Vanuata: “The government showed a willingness to innovate and were open to discussions right away.”
Indeed, the Pacific island nations are building a reputation for being crypto-friendly. Nearby, in Tonga, Bitcoin as legal tender has been widely discussed while just across the same body of water, the Marshall Islands has “opened the gates” to DAOs.
Vanuatu lacks “jobs and tourism,” while in terms of animals, the island — which used to be called Lataro — was overfished and over-poached. The population of coconut crabs was driven “close to extinction” prior to the land purchase.
The Vanuatu government warmed to the idea of creating a future-thinking space where job creation would be high. As for the crabs, the plan is to revive dwindling wildlife populations.
“The minister of finance was already interested in the idea of a digital economy and using blockchain technology when we spoke to him, so he was very excited about the idea of having our company and many of the brilliant minds in our industry call Vanuatu home.”
The team has since received a letter of support from the government to start building on the island using the “latest and greatest sustainable technology,” as solar power features are just one example of being added to the new builds of modular homes. The architect for the project added that “it’s a wonderful opportunity for them to build a land from the ground up.”
All of the energy generated from the island will be from renewable sources. Meanwhile, the team said that they’re “not really focused on cryptocurrency mining.” Instead, the plan is to use “solar panels built on top of the homes to run the entire community basically on a shared grid.”
When pressed on whether Bitcoin mining enthusiasts could pack an S19 into their suitcase to be able to mine sustainably, the team said that‘s still no problem at all.
Sustainability aside, the team stressed the importance of the overall feel of the island. “It’s not a resort” because it will be a “home” with “a permanent population.” According to the website, the goal is to be considered the “crypto capital of the world” — an unachievable goal without permanent residents.
21,000 investors or residents, echoing the 21 million Bitcoin that will ever be mined, will be the island’s headcount. Naturally, residency is granted via an NFT minted on the blockchain. To date, 50,000 people have registered interest in the project, buying into the vision of a “community where they can live, work and visit all year round.”
Nonetheless, NFT residency does not grant Vanuatu citizenship. If crypto enthusiasts want to say goodbye to fiat and hello to a year-round cryptocurrency life in the sun, the Vanuatu government states that citizenship costs $130,000.
The NFT marketplace is imminent while building the physical island development is underway. A “private opening” of the island is planned for quarter four this year for short-term visits. By early 2023, NFT homeowners will “be able to begin residing on the island.”
OECD opens proposal on tax transparency framework for crypto to public comment
According to the OECD, the crypto market posed a “significant risk” around tax transparency, claiming that any gains will eventually be lost without additional safeguards.
The Organisation for Economic Cooperation and Development, or OECD, has suggested additional requirements on reporting crypto transactions and identifying users aimed at increasing transparency for global tax authorities.
In a public consultation document released on Tuesday, the OECD opened for public comment a proposal that would require crypto service providers to better identify users and report on certain transactions. The organization said that under current reporting requirements, tax authorities do not have “adequate visibility” for transactions dealing with crypto assets. According to the OECD, the crypto market posed a “significant risk” around tax transparency, claiming that any gains will eventually be lost without additional safeguards.
The proposal suggested individuals and businesses already dealing in crypto services — including exchanges, retail transactions, and transferring tokens — have 12 months from the effective date of the rules to comply with the reporting requirements. Members of the public were asked to weigh in on which crypto assets would be covered under the proposal — including nonfungible tokens — as well as on tax reporting rules and “due diligence” procedures related to collecting information from those engaging in crypto transactions for both hot and cold wallets.
“Unlike traditional financial products, crypto-assets can be transferred and held without the intervention of traditional financial intermediaries and without any central administrator having full visibility on either the transactions carried out, or crypto-asset holdings,” said a summary of the report. “Therefore, crypto-assets could be exploited to undermine existing international tax transparency initiatives.”
Today the OECD released a public consultation document concerning a new global tax transparency framework to provide for the reporting and exchange of information with respect to crypto-assets. https://t.co/1qKFyXWOQb
— Amy Lee Rosen (@amyleerosen) March 22, 2022
The proposal will be available for public comments until April 29, with a consultation meeting expected at the end of May. The OECD said it aims to report on the amended reporting rules during the G20 Bali summit in October.
Related: Things to know (and fear) about new IRS crypto tax reporting
Tax season is upon residents of the United States, with many required to submit their returns by April 18. Countries’ tax authorities often have different reporting requirements for HODLing or exchanging crypto assets, with many U.S.-based centralized exchanges sending the Internal Revenue Service paperwork reflecting transactions for the previous year. Taxpayers often report exchanges of tokens or crypto into fiatas capital gains or losses.
EU vote on Bitcoin mining: What does it mean for the industry?
A win in the European Parliament, but will mining rules have to change? “Eventually, only PoS will be adopted by blockchain applications.”
Proof-of-work (PoW) crypto mining won’t be banned in the European Union — not this year at least. That’s the conclusion from last week’s closely watched committee vote in the European Parliament (EP).
A last-minute amendment presented by an ad hoc coalition of social democrats and Greens would have established a de facto ban on proof-of-work mining — the type of consensus mechanisms used by native cryptocurrencies like Bitcoin (BTC) and Ether (ETH) — has been decisively rejected. The crypto community can breathe easily, but some still worry that the industry’s problem with its energy-intensive consensus protocols remains.
“My first reaction to the Economic and Monetary Affairs committee vote outcome was a sigh of relief,” Joshua Ellul, director at the Centre for Distributed Ledger Technologies and senior lecturer at the University of Malta, told Cointelegraph, adding:
“It is definitely a sign that crypto and distributed ledger technology is no longer a niche bringing together technologists, investors, hobbyists and idealists — it is a technology that is here to stay.”
But, Ellul also believes that the community should not rest easy with last week’s win. Miners who support PoW blockchain projects should be “investigating renewable energy sources,” not only in anticipation of other possible regulatory actions but also to minimize their carbon footprint.
The committee vote was part of the European Union’s ongoing Markets in Cryptocurrency Assets (MiCA) process designed to bring harmonization, clarity and regulation to Europe’s cryptocurrency markets.
“In all likelihood, the de-facto PoW-ban amendment would not have found its way into the final MiCA agreement,” Patrick Hansen, head of strategy at crypto firm Unstoppable Finance, told Cointelegraph. But, that doesn’t mean that energy profligacy and carbon footprint are dead issues. Hansen added:
“The macro-environment — Ukraine, inflation, etc. — is changing rapidly, and energy consumption reduction might soon become an absolute policy priority.”
A wake-up call?
“This is good news for the crypto sector,” Yu Xiong, professor of business analytics and director of the Center for Innovation and Commercialization at the University of Surrey, told Cointelegraph, regarding the EP committee vote. It is another sign that cryptocurrencies and blockchain technology are being widely accepted by the public, but also “definitely provided a warning to those mining activities that use PoW. Prepare for transformation because nobody can predict if there will be another such vote in future.”
Ethereum will “hopefully” successfully transition to a more eco-friendly proof-of-stake (PoS) consensus mechanism later this year, he added. Otherwise, the vote provides time for other projects that use PoW to undertake their own transformation to reduce energy consumption and their carbon footprint.
Like some others active in the crypto space, Xiong believes that enlightened regulation — of the sort MiCA presumably offers — will be an overall plus for the crypto industry. Or, as European People’s Party spokesperson Markus Ferber put it recently:
“The markets for crypto assets have been like the Wild West for too long and need a European sheriff […] The new rules for crypto currencies will fill the existing regulatory vacuum by putting in place a clear framework to protect investors and ensure market integrity.”
All said, the 32 to 24 vote to reject the amendment was preceded by a certain amount of trepidation in the crypto community. “The MiCA situation is worse for crypto than anything in the USA,” noted Blockchain Association policy chief Jake Chervinsky, who said the amendment looked “like a pretext for a Bitcoin ban.” Meanwhile, Jean-Marie Mognetti, CEO of CoinShares, described the bid to ban PoW protocols as “more than just bad news” but rather “a thoughtless, uninspired proposal that does not reflect the realities and the future of the industry.”
Soon to be part of Europe’s sustainable “taxonomy”
Separate from the amendment tussle, the ECON committee also asked the European Commission to include cryptocurrency mining activities in its EU taxonomy — a classification system — for sustainable activities by January 1, 2025. The EU would then determine whether crypto mining could be classified as a “sustainable” activity. If deemed non-sustainable, European institutional investors and others might be inclined to give the crypto sector a wider berth.
“The taxonomy has a huge influence over where companies, investors and states [can] invest their money and subsidies,” explained Hansen recently. And, as more environmental laws pass, the more that influence will grow. Meanwhile, he added that PoW crypto mining could very likely be listed as “unsustainable” under the taxonomy.
But, this is still some time in the future and might be of limited scope. “I don’t think that the addition to the sustainability taxonomy from 2025 onwards will have a big impact on crypto adoption,” Hansen told Cointelegraph. “Depending on how it is defined, it might make investments in mining companies more difficult in the future, but we are still years away from that and mining is not an important economic activity in the EU anyway.”
More importantly, Hansen added, it will affect only the mining companies and “not the entire crypto industry as for the alternative amendment that was voted against.”
Xiong described crypto mining’s inclusion in the EU taxonomy as “reasonable.” It will put more pressure on miners to transition to more eco-friendly alternatives and he anticipates that fewer networks will use PoW consensus mechanisms come 2025. “Eventually, only PoS will be adopted by blockchain applications,” predicted Xiong.
Ellul said that the 2025 deadline offers some breathing room. “I hope that it encourages more renewable energy sources.” One problem with the PoW-energy debate, he added, is that it is highly polarized: “One extreme is that ‘no matter what the cost, PoW should remain,’ while the other is that PoW is going to kill us all.”
A less-heated middle position might be useful, he suggested.
A climate crisis looms
Were any lessons learned in this latest regulatory skirmish? According to Xiong, one lesson is that crypto and blockchain developers must “only embrace environment-friendly crypto” because any carbon emissions-related activities in this sector “will be quickly picked up by watchers.”
Indeed, Eero Heinäluoma, a European Parliament member and a backer of the anti-PoW amendment, said that “The carbon footprint of a single bitcoin transaction equals a transatlantic return flight from London to New York. This is 1.5 million times the energy used up by a VISA transaction. If we don’t curtail this massive carbon footprint by putting crypto-currencies on a more sustainable path, our efforts to combat the climate crisis and boost our energy independence risk being in vain.”
However, not all in the crypto community are swayed by these sorts of comparisons. Mognetti noted:
“At an annualized emissions rate of 41 million tons CO2, the global Bitcoin mining industry has a small environmental footprint relative to the aviation industry, marine transport sector, air conditioners, electric fans, data centers, and tumble dryers.”
Ellul agreed that the energy issue can’t be viewed in isolation. “Most everything of utility in the modern world requires energy and many other activities are power-hungry, too.” One example: Ireland’s power operator estimates that by 2028, 30% of Ireland’s electricity will be consumed by the country’s data centers.
Overall, the European Parliament committee vote “did not result in stifling technology this time, but indeed it raises questions about the future,” Ellul told Cointelegraph. Meanwhile, Hansen added that even if the committee vote had been lost, the mining ban would surely have been dropped from the MiCA bill later when the three key EU entities — Parliament, Council and Commission — reconcile their legislative texts in the EU’s unique “trilogue” process. Still, a defeat in the ECON committee would have looked bad, said Hansen:
“The mere symbol of the EU Parliament calling for a PoW ban would have had a very detrimental effect on the market.”