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The EU to Request Crypto Companies Report Users’ Holdings for Tax Purposes

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The European Union (EU) is working very hard in order to keep the cryptocurrency market under control. This time, the supranational organisation plans to force crypto companies to report users’ crypto holdings to tax authorities. This is one of the latest measures that the EU is trying to implement in order to regulate this fast-growing industry. 

EU To Force Companies to Disclose Users’ Crypto Holdings

EU citizens at online crypto platforms (including exchanges) could soon have their holdings reported to tax authorities. This is according to a proposed Directive on Administrative Cooperation. The draft bill was shared with CoinDesk and it covers multiple types of assets including digital assets such as Bitcoin (BTC), Ethereum (ETH) or Litecoin (LTC), stablecoins such as Tether (USDT); and derivatives. 

The surprising thing about this draft is that it makes reference not only to companies registered inside the European Union but also in other jurisdictions. The main goal is to reduce tax evasion at the EU level and increase the efficiency of tax collection. 

At the same time, EU authorities believe that there is a large number of users using multiple platforms anonymously. These users are able to make significant profits (sic) by trading digital assets without disclosing the information to their local tax authorities. “This is not acceptable,” said Paolo Gnetiloni, the EU Commissioner for tax. 

Of course, there are multiple things that are raising concerns in the crypto community. How would the EU obligate companies in other jurisdictions to share users’ private data with tax authorities in multiple countries of the EU? Moreover, exchanges might soon start to request additional information from clients, which could result in an increased threat to individuals. 

In the past, multiple cryptocurrency exchanges have faced leaks that ended with private information from users being shared with malicious third parties. Therefore, it is definitely important for crypto companies to make sure they only collect the necessary information and not more. 

This comes after multiple discussions about the EU’s Markets in Crypto Assets Regulation (MiCA), which is going to be applied to the crypto market as soon as in the coming years. Therefore, it is quite important to see the latest developments coming from the European Union as this is one of the first regions to implement strict reporting measures on the crypto industry. 

Other countries, including El Salvador and the Central African Republic (CAR), have already created their own regulations in terms of virtual currencies. Indeed, these are the two first countries in the world to make Bitcoin legal tender and allow citizens to use Bitcoin as any other currency. 

Due to this reason, it is possible to pay for goods and services using BTC and it is also used by individuals to receive payments from other countries. In El Salvador, a large part of the population lives with money that is sent from the United States and other countries. Therefore, using Bitcoin to avoid paying exorbitant fees to centralized financial institutions has helped the local community have better opportunities.

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