Brussels sets eyes on EU cryptocurrency tax

Brussels sets eyes on EU cryptocurrency tax

Officials have met to decide on an EU-wide cryptocurrency tax.

The European Commission will shortly start discussions with the union’s treasuries to determine if the cryptocurrency market warrants a single EU tax structure.

As nations pursue various tax and rate structures for the expanding market, three EU officials told POLITICO that conversations to share best practices will start in the new year.

The Commission will most likely introduce regulations in December or January. The regulations may go into effect as early as 2026.

What do the negotiations indicate?

The coming EU tax negotiations are an indication that authorities want to control the market. Conditions have reduced the value of crypto assets by almost $2 trillion this year alone.

Policymakers worry that a lack of safeguards could expose major banks and money managers to large losses. FTX, one of the biggest cryptocurrency exchanges on the market, is a real-world example. After 48 hours of turmoil and reports that the massive cryptocurrency exchange was bankrupt and unable to meet customer withdrawal requests, it is now looking for a lifeline.

“Difficulties in categorizing, valuing and administering crypto assets pose problems to tax administrations aiming to tax them fairly and effectively”, a Commission official responded when asked about a potential EU crypto tax. To ease and encourage the sharing of best practices surrounding the taxation of crypto-assets, the EU will closely cooperate with its member states.

Key takeaways

Europe has taken the lead in regulating cryptocurrency. A unified set of market regulations known as MiCA were approved by Brussels legislators in late June. The regulations will take effect in 2024.

Operating across the 27 different jurisdictions of the EU would be significantly easier for cryptocurrency dealers and businesses under a single taxation system.

The regulations are expected to give the taxman a clear picture of who owns what on the market while safeguarding anonymity. According to the top officials, the EU may enact a cryptocurrency tax as early as in 2026.