The Strategist

UNCTAD: Cryptocurrencies become new tax havens



08/18/2022 - 14:10



According to a study by UN Conference on Trade and Development (UNCTAD), cryptocurrencies help to muddle the tax base and undermine capital controls in emerging economies.



rawpixel.com
rawpixel.com
UNCTAD analysts concur that cryptocurrencies weaken capital controls and the tax base in developing nations. The fact that crypto-asset payments are not governed by the same regulations as conventional financial assets makes it difficult for authorities to impose more controls on them.

The Financial Action Task Force on Money Laundering (FATF) estimates that fewer than 10% of the entire number of bitcoin transactions fall under the category of criminal conduct, indicating that there is not much direct criminal activity in the cryptocurrency space.

However, unlike traditional tax havens, cryptocurrencies don't rely on banks or other related legal and accounting services because transactions are made through unregulated cryptocurrency exchanges. Instead, cryptocurrencies share all the traits of traditional tax havens, including anonymity of accounts, lax regulation, and lax tax controls.

The value of cryptocurrencies as money is fairly high; as a result, more than 80,000 bitcoin wallets are said to have a total balance of more than $1 million, according to UNCTAD.

The majority of emerging economies do not tax digital assets, and cryptocurrencies are not recognized as legal tender.

By November 2021, 67 jurisdictions had already enacted tax laws pertaining to cryptocurrencies, but this legislation's efficacy was limited due to the absence of a widely acknowledged strategy for taxing cryptocurrencies in the absence of restrictions on cross-border transfers.

In addition, UNCTAD emphasizes that users of cryptocurrencies have no reason to disclose their holdings while their popularity is growing. Cryptocurrencies are favored by middle-class households as well as the wealthy because they can act as a hedge against inflation and exchange rate fluctuations during periods of political and/or macroeconomic instability.

Additionally, cryptocurrencies can be used to quickly withdraw money from a nation, depleting the financial resources of developing nations.

Miners, who essentially receive cryptocurrency in exchange for electricity paid for in local currency, also help to enable capital outflows.
Cryptocurrencies are expanding quickly in nations with high inflation and shaky economies, according to a previous IMF report.

source: unctad.org

 




More
< >

Monday, September 26th 2022 - 11:19 Colombia's Ecopetrol increases oil exports to Europe