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PwC’s global crypto tax report reveals the need for further regulatory guidance



One of the Founding Fathers of the United States, Benjamin Franklin, once said: “But in this world, nothing can be said to be certain, except death and taxes.” While this phrase was realized in 1789, the same still holds true today. The only difference is that taxes are slowly but surely catching up with crypto assets.

Therefore, it shouldn’t come as a surprise that Big Four accounting firm PricewaterhouseCoopers has just released its first annual Crypto Tax Index as part of the “Global Crypto Tax Report.” The detailed report contains the latest global crypto tax developments, along with crypto tax information for over 30 jurisdictions. Interestingly, 61% of jurisdictions surveyed have issued guidance on the calculation of crypto capital gains and losses for individuals and businesses.

The survey’s Crypto Tax Index ranks jurisdictions based on the comprehensive structure of their tax guidance. The report shows that the tiny yet innovative European country of Liechtenstein tops this year’s rankings, closely followed by Malta and Australia. 

Crypto assets are finally taken seriously

Peter Brewin, a tax partner at PwC Hong Kong and a report contributor, told Cointelegraph that the industry is finally starting to see more activity by some of the supranational policy setters like the Organization for Economic Co-operation and Development. As a result, tax authorities have been showing an increasing interest in crypto assets, but these guidelines are dated:

“What our research shows is that the guidance issued by many tax authorities is already getting dated. Yes, it is important that people know how to account for tax on the trading of Bitcoin and other cryptocurrencies, but that is really crypto tax 101.”

Although basic guidelines have been established on how to tax common crypto assets, Brewin points out that loopholes remain. “What we really need, and which is lacking in nearly all jurisdictions, is principles-based guidance that is fit for the new decentralized economy,” he said.

That being said, one key takeaway from the report is that no jurisdiction has issued guidance yet on topics that are shaping the future of an economy built around digital assets. For instance, there are no taxation guidelines when it comes to crypto borrowing and lending, decentralized finance, nonfungible tokens, tokenized assets and staking income.

This is alarming, considering the recent rise of DeFi and billions of dollars are being locked in DeFi contracts, as criminals may exploit the hype. While impressive, the PwC report highlights that without guidance, innovative companies and startups will be faced with significant tax uncertainty, especially in regards to cross-border activities.

The document provides some recommendations; for example, when it comes to the taxation of DeFi, it’s mentioned that this should include how income from the DeFi platform is taxed at the recipient level and whether jurisdictions may seek to tax payments at the source. This is similar to how withholding taxes are commonly applied to interest payments in traditional finance.

The report also takes into account the crypto industry’s ever-changing ecosystem, therefore, noting that future guidance should be principles-based and not overly prescriptive.

Crypto still primarily viewed as property

Another important finding in the report is that most jurisdictions view cryptocurrencies as a form of property from a tax perspective. In fact, very few consider digital assets as currency for taxation purposes. The report notes that this is because the disposal of property is considered similar to a barter transaction; therefore, results in a gain or loss could be subject to tax.

Yet this isn’t the case in all jurisdictions. For instance, countries such as Israel are starting to propose that Bitcoin should be taxed as a currency. If this proposal becomes a law, digital currencies such as Bitcoin (BTC) could be taxed at a lower rate in Israel than those currently in place.

Although, having cryptocurrencies taxed as a currency could also result in challenges. The report points out that a tax change could potentially be triggered each time an individual spends a digital asset. This is problematic because many consumers are not able to calculate their gains or losses from each of their daily transactions. This is generally not the case with fiat but could be if cryptocurrencies were to be used, resulting in another barrier to mass adoption.

Tax uncertainty will create challenges

Overall, PwC’s crypto tax report shows that while significant work has been done to provide guidance for the taxation of digital assets, the industry is not up-to-date with recent developments. In turn, businesses will continue to be faced with tax uncertainty, creating further challenges for adoption and innovation.

While this may be, authorities are aware of the fact that new crypto taxation guidelines are needed. Mazhar Wani, fintech leader at PwC U.S., told Cointelegraph that while it’s tough to estimate when official guidance will be issued in regards to topics like DeFi and staking, these points are being discussed by global tax authorities. “The OECD is also looking at many of these points since it falls within their broader initiatives, so we hope to see something soon,” he said. However, Brewin points out that when it comes to DeFi, taxation clarity could take much longer:

“Particularly when you have a fully decentralized platform, it’s not clear to me that approach will work, given that you are dealing with a completely different animal. We’ve not really seen a parallel for this when it comes to tax.”

Although this may be, Brewin suggests that today’s challenges can be overcome if the industry continues to work with policymakers to ensure that they understand the complexity and ever-changing nature of the crypto industry.

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London Stock Exchange-listed firm inks FCA’s approval for crypto services




Mode Global Holdings, a London Stock Exchange-listed fintech group, has secured major regulatory approvals for cryptocurrency and fintech operations in the United Kingdom.

The company announced Thursday that Mode has secured its Electronic Money Institution license and AMLD5 registration from the U.K. Financial Conduct Authority.

The AMLD5 registration has been granted to Mode’s crypto arm Fibermode Limited, establishing it as an official crypto asset firm in the United Kingdom, pursuant to the amended regulations on money laundering, terrorist financing and transfer of funds.

The AMLD5 registration is a requirement for crypto-related businesses in the country that fall within the scope of money laundering regulations. According to the announcement, Mode is the fifth company to have received this registration to date since the FCA became the official AML supervisor of the crypto industry in the U.K. in January 2020.

Alongside the AMLD5, Mode’s subsidiary Greyfoxx Limited also acquired the EMI license, which enables Mode to offer a “range of innovative financial services” to both businesses and consumers in the United Kingdom, the announcement notes.

Following the acquisition of new regulatory approvals, Mode is planning to further expand its crypto services, including decommissioning its investment product known as the “Bitcoin Jar.” The product aims to allow Mode customers to use Bitcoin (BTC) to generate BTC interest rather than simply holding it in a wallet or on an exchange.

Mode CEO Ryan Moore noted that the new regulatory developments provide a major step in Mode’s mission to deliver a trusted and regulated environment. “It means we now have the ability to scale our operations and continue delivering innovative payments products for our customers under our own EMI licence. Both the EMI licence and the AMLD5 registration ensure business transparency, strong oversight and give our customers confidence in our offering,” he said.

Related: UK regulator warns against 111 unregistered crypto companies… and FOMO

The latest news comes shortly after a member of the British Parliament pointed out major difficulties in the process of registering crypto firms under the FCA’s AML regulations in late May. Economic secretary John Glen elaborated that FCA was not able to process and register all applications by its previous deadline due to a significant number of firms failing to adopt robust AML control frameworks as well as employ proper staff.