European Commission is thinking about taxing crypto assets to get about $2.5 billion. This directive will have an effect on a cryptocurrency network that is regulated and on investors in the EU.
Crypto Taxes May Bring in $2.5 Billion for the EU
A European Commission proposal for taxing crypto estimates that taxes on crypto assets could raise as much as €2.4 billion ($2.5 billion), a leaked draft obtained by The Block suggests. The proposal, which is scheduled for adoption in the Commission this week, claims to close the “regulatory gap” and remove tax evasion opportunities for crypto investors as well as ensure member states avoid a tax shortfall.
According to the draught, crypto service providers in the EU will have to report to their countries’ tax authorities. The draught defines crypto assets as “issued in a decentralised way, as well as stablecoins and certain non-fungible tokens.” For rules to apply, a crypto asset must be used as a way to pay for something or as an investment. “A limited network and certain utility tokens” may be exempt from this rule.
A spokesperson for the European Commission said that they couldn’t confirm or deny any of the information in the document.
As negotiations on the proposal move forward in the EU institutions, it will likely remain hard to define the taxable event in crypto markets. But because the directive is aimed at service providers, it will be easier for authorities to get the information they need from crypto users. This is because the Commission wants to reduce the “administrative burden” on the industry.
A proposed tax directive for cryptocurrencies
The Block says that a recently leaked draught document points to a possible new tax directive that will focus on cryptocurrency. The European Commission thinks that crypto taxes will bring in $2.5 billion (about €2.4 billion) on their own.
Reports say that the cryptocurrency industry has a regulatory gap that this proposal can fix. The goal of the commission is to make sure that all EU member states pay their fair share of taxes and close any tax loopholes. Leaked information says that the new proposal is likely to be approved by the EU commission by the end of the week. The plan might already be on its way to being approved, but applications wouldn’t start coming in until early 2025, with most coming in 2026. The EU’s administrative cooperation directives will now include crypto assets, thanks to a new draught proposal.
Cryptocurrency service providers to report
The same directive says that crypto service providers must report to tax authorities at the national level. At first, both centralised and decentralised networks were included in the proposed law. But the commission’s latest document is mostly aimed at service providers for regulated crypto assets.
Because of this, all cryptocurrency service providers may have to report to all national tax authorities. Also, the draught calls all crypto assets “decentralised assets,” along with stablecoins and some tokens that can’t be exchanged for cash. The new rule will only be in effect if cryptocurrency assets are used to pay for things or make investments. But this is a directive, not a rule made by the government. All EU member states can decide how to put new rules into place in the best way.
EU working on MiCA
The MiCA proposal was made by the European Commission in 2020 with the goal of regulating the crypto markets. Even though the plan hasn’t been approved yet, reports say that a vote will be held on it in February 2023, and it will start to be used in 2024.
The goal of the regulatory framework is to protect investors and keep the economy stable while allowing for innovation and making the crypto-asset sector more appealing. Authorities think it will bring more clarity to the EU, since some member states already have laws in place for crypto-assets at the national level, but there hasn’t been a clear set of rules at the EU level until now.