According to a member of the Board of Directors at the European Central Bank, Bitcoin must be given a legal framework and even taxed. But, how does this hold up with Bitcoin users?
Bitcoin as A Tax Haven
While most of the famous cryptocurrencies are consistently breaking records, both bankers and public authorities are now starting to take a serious look at the world of crypto finance.
Ewald Nowotny, Director of the Austrian Central Bank (Oesterreichische Nationalbank), recently said in an interview to the German newspaper Sueddeutsche Zeitung that any person making any sort of financial transaction needs to be identifiable, in addition to being required to pay VAT.
According to Daily Mail, Nowotny also expressed concerns about the possibility of money laundering. “… We stopped selling the 500 Euro note to fight against money laundering, and then we introduced strict regulations on investments, all of this work to now watch people easily laundering money around the world with Bitcoin…”
Nowotny’s statements come just days after ECB board member, Benoît Coeuré stated to Caixin Global that Bitcoin is nothing but a bubble. And, like his Austrian counterpart, Coeuré believes that tax evasion and money laundering are of the biggest concerns surrounding Bitcoin.
He also added to his statement that Bitcoin’s success is only due to speculation, stating, “The risk of losing a lot of money is real and this is something that investors must realize.”
Joining the other’s who do not believe in it, the two bankers say that Bitcoin is not a real currency. Coeuré also added to his statement saying that investors will not be able to use it to make payments.
However, he says that DLT (Distributed Ledger Technology), in general, is showing huge potential for developing into other applications. This was in reference to the recent joint venture between the ECB and the Bank of Japan to look for other ways of using the technology.
While central banks around the world are working to see how they can use DLT technology to update or even replace their existing systems. But, according to Coeuré, the problem is that the technology is still too new for larger scale implementation.
Bitcoin Already Taxable in France
It is worth noting that recently, in mid-December, the French Minister of Public Accounts, Gérald Darmanin, said that capital gains made on Bitcoin transactions were in fact taxable. He also emphasized that the French government wants to ensure that cryptocurrency is not being used to finance terrorism or any other forms of organized crime.
At a press conference in Bercy, he insisted that he has personally instructed the French tax administration to look closely at capital gains made on Bitcoin transactions. And, that if a person does not declare their gains, the administration will intervene.
This statement is meant to prove that Bitcoin users are still law-abiding citizens who pay their taxes. For tax authorities, the purchase and sale of Bitcoin is considered a speculative activity and is, therefore, subject to income tax. This means that if an investor is only active occasionally, they will be subject to the BNC tax which is meant for non-commercial profits. On the other hand, for industrial and commercial investors who are regularly active in trading, they will be subject to the BIC.
For The ECB, Bitcoin is A Product, Not a Currency
The ECB has had their eyes on Bitcoin for quite some time now. In addition to wanting to regulate the market, many banks are now wanting to see Bitcoin subject to the VAT. Notwotny has clearly expressed his opinion on the issue, saying that the ECB, knowing well that Bitcoin is not a currency, needs a VAT on it.
This opinion is, however, not a new one. Cryptocurrency has scared the banking world since day one by providing people with a more attractive and lucrative way to invest their money.
However, to this day, it is still hard to imagine how any authority will be able to force citizens to pay tax on capital gains that are only speculative.