Meanwhile, we see more and more countries preparing regulations for crypto. This includes international collaborations. One such collaboration is the G20. The proposed regulations may pose a danger to crypto trading. We explain this and, of course, start at the beginning.
What is the G20 and what do they have to do with crypto?
The G20 is an international cooperation of the world’s 19 largest economies and the European Union. They try to strengthen international financial cooperation in this context. For example, they agree on rules on how companies should pay taxes and how to combat money laundering and terrorism.
To harmonize crypto taxation, they have created the Crypto-Asset Reporting Framework. This document details how companies should handle crypto taxation. The document complements existing agreements on taxation.
What did the G20 decide on crypto?
This framework decides how to regulate the exchange of tax information on crypto trading. This framework complements an earlier framework that has now been implemented in 100 countries.
The new regulations do not apply to 3 types of crypto:
Government digital crypto currencies;
Crypto that cannot be used for payments and/or investments;
Crypto that is backed by one specific fiat currency.
Why is G20 decision on crypto relevant to individuals?
The document places the responsibility for data collection primarily on exchanges and other professional intermediaries. Thus, to comply with those regulations, trading houses will have to take measures so that they can (better) identify their customers. In addition, the document expands the reporting obligation with respect to the number and type of transactions.
Thus, trading houses will have to take measures so that they can monitor and record their clients’ transactions in the desired manner. In addition, many participants in the G20 such as America and the European Union are making their own rules for crypto investing. This tax obligation will be included in those.
In addition, we read in the framework a limit of $50,000 per transaction. To avoid misunderstanding, this limit applies only to individual transactions. All transactions (no matter how small) must be reported in aggregate statements. This allows six $10,000 transactions to still be flagged.
What are the implications for your crypto?
First of all, these regulations increase the tax detection capabilities. As we know, crypto transactions are already reported in the Netherlands, but exchanges in other countries will now have to report as well. With so many countries (100 jurisdictions) participating in these regulations, the question is what this means for exchanges that currently operate without a KYC policy.
Thereby, this has implications for the tradability of your crypto. Although crypto trading was never actually anonymous, the possibility to trade crypto pseudonymously becomes much smaller. In addition, this can put various crypto currencies at risk. We list some of the crypto that could be at risk.
These crypto are at risk due to the G20 framework
First, of course, there will be an impact on crypto trading in Bitcoin since it accounts for more than 50% of transactions. On the other hand, the danger is not that great.
Much more problems will be expected with privacy coins. These are aimed at keeping the data of parties involved in transactions anonymous, which runs counter to the requested transparency and reporting requirements. Popular crypto coins such as Monero (XMR), for example, are therefore being offered on fewer and fewer exchanges.
Coins with high volatility are also at risk. When strong price fluctuations (especially increases) can cause your crypto holdings to suddenly exceed $50,000, your transactions are suddenly reported individually and many crypto owners will not like that.
How the further details of the framework regulation will play out we will no doubt notice once the new crypto laws are implemented in Europe and America, but that the industry will notice is certain. Finally, the question is to what extent these rules and calls for transparency affect the popularity of crypto. After all, anonymity/pseudonymity is one of the 3 pillars underpinning the success of crypto currencies. To be continued, then, no doubt….
You can read the OECD’s entire Crypto-Asset Reporting Framework here.
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