Cryptocurrencies still a “tax haven”

Although tax authorities around Europe tax cryptocurrencies as assets, there is no reporting obligation for the trading places to provide information about the customers’ trades. Tax authorities believe that there is a large dark population of people who have not declared their crypto profits. But change may be on the way via additions to EU directives.

During the spring, the global cryptocurrency market passed two trillion dollars in value, or approximately SEK 16.5 trillion.

Tax authorities consider cryptocurrencies as assets rather than currencies, with varying tax rates for different countries. In Sweden, all profit from trading in cryptocurrencies must be taxed with 30 percent capital gains tax, for example.

But it is uncertain what percentage of European cryptocurrency traders tax any profits.

“The trading venues have no obligation to notify us of trading in cryptocurrencies”

One of Europe’s first crypto exchanges BTCX, owned by the company Goobit Group, announces on its website that it has had over 200,000 customers since its inception in 2012. At the same time, only 3,000 people declared trading in cryptocurrencies in 2018, which was also a considerable increase compared to previous years.

– The trading venues have no obligation to notify us of trading in cryptocurrencies. For now, we have to rely on people declaring their trade themselves and doing our own checks. But there can of course be changes to that, says Henrik Kisterud, control coordinator at the Swedish Tax Agency.

Average total sales amount in the declarations is around 40,000 euros per person who declared cryptocurrency trading, and most declare a profit – the distribution is approximately 80-20, according to Henrik Kisterud.

But he also believes that there is a large number of dark people around Europe who have not declared crypto trading.

– It is clear that there is a dark figure, and it is probably not just twice as high but many times higher than those who have declared, he says.

EU wants to regulate cryptocurrencies

But regulation of cryptocurrency trading that would reduce the risk of fraud may be on the way at the EU level.

In the autumn of 2020, the EU Commission submitted a proposal for a new regulation concerning crypto-assets, which should also cover cryptocurrencies that are not part of financial instruments. The regulation is called Markets in Crypto Assets (MiCA) and is part of the EU’s digitization strategy for the financial market.

– The regulation is currently being discussed in the council working group within the EU and those negotiations have not been completed yet. It is the Ministry of Finance that participates on behalf of Sweden in those negotiations. Depending on how the negotiations go, the regulation may be completed by the end of this year and likely come into force between 12 and 18 months later, says Per Nordkvist.

He says that the regulation broadly means that issuers and issuers of crypto assets end up under supervision.

– How extensive the authorization process will be depends on the type of crypto-asset in question, which also governs the scope of supervision.