- The European Commission has published a policy that would see crypto-handling entities forced to hand over more personal information on their users
- The Commission says it wants to claw back over $2.5 billion per year in lost tax revenues
- Non-EU entities would also have to comply if they served EU citizens
The European Commission is currently asking for feedback on a policy that would see crypto-handling entities both inside and outside the EU to report users’ activities for taxation purposes. The stated aim of the proposal, which would affect crypto processors both within the EU and abroad if the user is an EU-citizen, is to reduce tax avoidance, which it says counts for as much as €2.4 billion ($2.53 billion) per year. Such reporting requirements would place more burdens on exchanges that are already working out how to cope with recently introduced data collection requirements.
Increased Reporting on Crypto Users
The European Commission gives two reasons why it needs to start collecting details of user activity:
- The lack of information at the level of national tax administrations about the emergent use of crypto-assets and e-money, possibly resulting in revenue losses.
- The disparity in the sanctions applied based on the current provisions and other necessary punctual adjustments/improvements to be made to the Directive.
To resolve this, the Commission wants all companies within the EU that handle cryptocurrencies, and those outside the bloc whose users are EU citizens, to provide personal information about their users, including their place of birth and current location, to tax authorities. More pertinently, they will also need to report all crypto activities of that person, including crypto income, purchase and sales.
Exchanges Already Implementing Other Measures
The policy has been put forward as an addition to a wider package of anti-tax evasion measures, and is currently going through a public response period until December 20, giving those who would be affected the chance to have their say on the policy.
The new policy comes at a time when exchanges are already struggling with the practical and ideological permutations of recently enforced regulations, such as the FATF Travel Rule, AMLD5 and the imminent implementation of MiCA.
