USA and crypto currencies: Tax payment is a rarity

On the US online platform Credit Karma, out of 250,000 taxpayers, only 0.04% stated that they would pay tax on their profits from trading in crypto currencies. According to current estimates, $25 billion in taxes are due on digital currency profits in the US alone. As a result, countless users have simply dropped some data under the table when it came to reporting revenues.

Out of 250,000 users of the financial services provider Credit Karma, fewer than 100 have admitted to declaring revenues from crypto currency trading in their 2017 tax returns. In the USA the tax must be submitted earlier than in Germany, the deadline already ends on April 17. In Germany there Bitcoin Evolution is still time until May 31 without a tax consultant. If you submit your tax return to Elster Online, you have two more months to submit it.

Bitcoin Evolution and Tax

In the USA, all crypto sales are subject to capital tax. Credit Karma Tax assumes that the information about crypto profits is only submitted at the last minute due to the complexity. Or not at all. At first glance, taxation does not seem as complicated as it might seem. In addition, the US Internal Revenue Service (IRS) has long been wide awake when it comes to this issue. A few months ago, the US online trading centre Coinbase was to be obliged to provide a great deal of information in Bitcoin Evolution order to find out about US tax evaders. When the operator refused, the IRS went to court. Instead of disclosing at least 500,000 account data, Coinbase was now obliged to disclose the most active 13,000 users.

Paying taxes must not be a coincidence
The Düsseldorf lawyer and book author Dr. Joerg Andres cannot understand why Bitcoin profiteers still brag about not paying tax on their crypto profits. Andres describes it as „highly risky“ to withhold this income from the tax office. He believes that it is only a matter of time before the tax offices catch up. They would soon be able to track down these revenues as well. Even if it takes some time, employees of tax offices at Coinbase & Co. can access the data of German taxpayers as part of a request for information. Just because an online trading centre is located abroad, the tax offices can still compare the information in the tax return with the credit balance and the activities of the respective wallets. Prof. Dr. Andres comments: „Anyone who still believes in the myth of the complete anonymity of blockchain activities should not be surprised if good advice literally becomes expensive afterwards. Anyone who in the past has not yet completely fulfilled his or her reporting obligations to the tax office should do so as soon as possible. There is still a good chance that such omissions will be dealt with without penalty.“

BaFin Perspectives: Thoughts on possible regulation

The Federal Financial Supervisory Authority, also known as BaFin, has expressed its „perspectives“ on the challenges for a possible regulation around the blockchain technology.

Blockchain, Bitcoin and regulation – a trio that still hasn’t become quite warm with each other. While the US Securities and Exchange Commission (SEC) is currently primarily concerned with the possible introduction of Bitcoin ETFs, the authorities in Germany are also concerned. In its annual report published on August 1, BaFin commented on the challenges of a possible regulation of block-chain technology and its manifestations. Relationship status: It is complicated.

Blockchain offers challenges and opportunities
One of the core properties of blockchain technology is therefore both a great opportunity and a challenge. Satoshi Nakamoto already made this strong case for Bitcoin in his white paper: The lack of intermediaries, i.e. mediating instances. This is how BaFin writes:

„One of the core questions of sustainable business is how to establish trust between unknowns in order to facilitate transactions. So far, intermediaries such as banks and central securities depositories have made this possible, but their role has led to higher transaction costs and less efficient markets. Block-chain technology can help to minimize the necessary trust and thus the transaction costs between the parties involved in the transaction, for example by reducing their dependence on intermediaries.

Because the question that follows is this: How can we regulate something that does not have any responsible parties? Another problem that BaFin sees is a point that is often celebrated as an advantage, especially among Bitcoin and cryptenthusiasts: Their unchangeability. To this end, the BaFin continues:

„For example, it is still questionable how existing requirements, such as the European Data Protection Basic Regulation (DSGVO) and the „right to be forgotten“ contained therein, could be fully implemented with the currently known procedures using blockchain technology.

BaFin stresses the revolutionary potential of the blockchain
Nevertheless, BaFin highlights the revolutionary potential of the technology that has made Bitcoin so well known. According to this, it has great innovative power across all industries and the potential to influence the financial industry in many ways. Ultimately, however, the technology still has to struggle with start-up difficulties, which should „call for caution“.

After all, BaFin’s report addresses a topic that is of particular concern to authorities around the world. Cryptotokens, payment tokens, virtual currencies, securities-like tokens, utility tokens and above all: your distinction. This is done in the German bureaucratic manner as a delicate basis for future regulatory approaches. (The details should be spared to our readers at this point. Those who want to check the distinguishing features themselves can do so in the entire report here on pages 54 – 65.)