Decentralized blockchain technology took the world by storm when it was first introduced more than a decade ago. Blockchain and crypto promised to deliver enhanced security and privacy, visibility, traceability, fast transactions and immutability. The crypto market grew increasingly popular over the years and attracted millions of users, especially those from developing countries because they traditionally have limited access to investing.
With a valuation of $1.6 billion in 2021, the cryptocurrency market is expected to be worth $2.2 billion by 2026. As the market has grown and evolved, there have been efforts by lawmakers in regions that allow cryptocurrencies to pass some kind of crypto policies. The European Union parliament recently did just that by approving a nonbinding resolution calling for the passage of tax policies for the blockchain and cryptocurrency market.
These regulations would allow for the use of blockchain to coordinate crypto tax policies and fight tax evasion. Tax experts have long said that cryptos such as Bitcoin and Ethereum can provide a way for people to hide their income from the taxman due to lax reporting requirements. Members of the EU parliament voted in favor of a resolution that urges leaders in the 27 member states to consider creating a “simplified tax treatment” for cryptocurrency users.
Authorities in member states are also encouraged to consider having national tax administrations that leverage blockchain to “facilitate efficient tax collection,” the resolution said. It also called on the European Commission to analyze whether or not to tax the conversion of digital tokens to fiat currency depending on the location of the transaction. Furthermore, the policy asked for an administrative exchange to make the exchange of information on crypto taxes more efficient.
The resolution stated that member states could automate tax collection, reduce instances of corruption, and pinpoint ownership of intangible and tangible assets using blockchain technology. Furthermore, it stated that member states would have to work on figuring out best practices that would make it possible to use technology to boost tax administrations’ analytical capacity.
European Union lawmakers are already taking steps to regulate the cryptocurrency market on the continent. Policymakers introduced the Crypto-Assets Framework back in 2020, which was adopted by the EU in 2021. The bill looks to launch a standardized regulatory framework for cryptos in EU member states and is expected to take effect in 2024. This would make Europe the first continent in the world to pass standard crypto-asset policies.
As more jurisdictions enact policies regulating cryptos and blockchain, industry operators such as Marathon Digital Holdings Inc. (NASDAQ: MARA) are likely to gain even more acceptance among members of the public that were wary of this new and disruptive technology.
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