The days when cryptocurrencies were (nearly) totally anonymous are long gone. Struck by the reality that this anonymity would invite people to use cryptocurrencies for money laundering or other criminal activities, authorities now are topping up their taskforces to monitor crypto-traders and exchanges.

Status Quo

While at the start the community around Bitcoin and Co. got little attention by governments, they now, in 2018, are in the game. On the one hand of course trying to protect their citizens but second of all to pursue their own interests. And this means preventatively gathering data from crypto-traders as well as exchange platforms to follow up on criminals and tax evaders. Starting in 2014, the US were the first nation to have authorities look into the issue of cryptocurrencies in more detail. Four years later, in July 2018 the IRS even launched an international taskforce in cooperation with Australia, Canada, the Netherlands and the UK under the pretext to reduce the threat on tax administrations. “The Joint Chiefs of Global Tax Enforcement” also called “J5” combine their international forces to develop strategies on how to gather information and intelligence as well as operating in joint investigations. The IRS (Internal Revenue Service) itself already has some experience in this field, pressuring popular exchanges like Coinbase to hand over data of 13.000 users. Other authorities, like the Belgian STI (Special Tax Inspectorate), are jumping on this bandwagon, looking into opportunities and ways to persuade exchanges to hand over their seemingly anonymous customers’ data. Also Australian tax authorities are talking about their plans to not handle crypto tax evaders with kid gloves any more. Using 100-point-identification-verification systems, the ATO (Australian Taxation Office) wants to gather as much data as possible from crypto-markets, making it nearly impossible to hide behind pseudonym addresses and accounts.

Situation in the EU

Also the Austrian government is in touch with exchanges, has their special teams that crawl the Blockchain and identify users behind their transactions. And yet as virtual currencies are not covered by national boundaries, many users feel safe when trading globally. It is a fact, that there are no uniform international regulations that apply to the whole crypto-community but it’s not only single countries anymore that operate against crypto-related criminal cases. Only this month (July 2018) the European Parliament published an in-depth analysis report on virtual currencies (“Virtual currencies and central banks monetary policy: challenges ahead”), stating that although a uniform approach concerning financial regulations is not yet to find, there is made effort to harmonise the regulations of each country. Special focus lies on ensuring that exchanges follow KYC and AML requirements. This meaning that the EU is working on imposing pressure on exchanges to make them apply KYC processes at the point of registration when transactions overcome a certain limit. Furthermore, the European Union is aiming at developing Anti Money Laundering laws with the goal to have exchanges report suspicious transactions to financial authorities.

What to expect next?

The “J5”, the European taskforce and nationally composed expert teams with the attempt to monitor cryptocurrencies and combat crypto-related crimes are coming at crypto-traders and exchange platforms. This should be clear to anyone involved in the crypto market, even for adherents of total anonymity and advocates of so-called privacy coins.

What can I do?

This is exactly why we at Blockpit are working on a solution to make at least one regulatory problem – crypto taxation – less a threat. With further regulations just around the corner our transaction overview offers an additional solution that helps crypto traders to "cash out" their profits at their banks. On the one hand, this minimizes the risk of (unintended) financial fraud and on the other hand, the complexity of the correct execution of crypto taxes is being challenged.



We recommend all taxpayers to record all income from cryptocurrencies transparently and neatly. These proofs can and will be requested by the tax office. The information stated above provides an initial overview over the situation internationally and in Austria and does not claim to be exhaustive.

Sources:

Blockonomi: Bitcoin money laundering

European Parliament: Virtual currencies and central banks monetary policy: challenges ahead

Cointelegraph: Five nations launch tax enforcement alliance to tackle crypto cybercrime threat

Cointelegraph: Belgian tax authority to search for taxpayers using foreign crypto exchanges

Cointelegraph: Australian tax office to crack down on crypto tax evaders

Cointelegraph: US tax filing service says only 4% of customers reported crypto to IRS for 2017

Trending Topics: EU intensives rules for the trading of cryptocurrencies (german version)