EU tax proposal will affect cryptocurrencies around the world

EU tax proposal will affect cryptocurrencies around the world
A new initiative by the European Commission would require all crypto-service providers to report transactions by EU customers to tax authorities

A new European Commission proposal on cryptocurrency taxation would affect companies around the world, according to The Block. The publication reports that under the rules the European Commission wants to approve, crypto-service providers, regardless of their geographical location, will have to report transactions of their EU customers to tax authorities.

"The tax authorities lack the information to monitor the income generated by crypto assets, which are easily traded across borders. This severely limits their (tax authorities') ability to ensure effective tax collection, which means that European citizens are losing important tax revenue," the publication quoted the commission as saying.

According to European Commission statistics, the gap between expected and collected taxes within the bloc was 93 billion euros in 2020. This represents 9.1% of total expected revenues. The collection of taxes on crypto-assets in the EU could increase revenues by 2.4 billion euros, the Commission said.

The scope of the proposal covers crypto-assets "issued in a decentralized manner," including stablecoins and NFTs. The commission has also proposed tracking the cross-border transfers of wealthy individuals to prevent opportunities to hide wealth from tax officials.

They would also require unanimous approval from state representatives in the European Council. The European Commission hopes for the new rules to go into effect beginning in 2026, the article said.

In October, the European Parliament agreed on a bill to regulate cryptocurrencies in the European Union Markets in Crypto-Assets (MiCA). The document introduces institutional regulation of cryptocurrency issuance and establishes a uniform legal regime for crypto-service providers in the union. The document provides for an adaptation period of 12-18 months to prepare for the introduction of the new laws. The earliest the provisions will come into force is the beginning of 2024.