Bitcoin, Ethereum, and all the cryptocurrencies and tokens available in the market have to overcome several obstacles that stand in their way. If the first concerns the struggle of certain states to maintain their monetary sovereignty, the second concerns customers directly and their ability to comply with taxes quickly and easily.
Currently, the alignment of the planets is benefiting the rise in digital currencies and Bitcoin continues to grow (despite the recent correction from $ 40,000 to $ 30,000) Coinbase and PayPal, both of which offer to buy and store cryptos on their platform, used their Olympic form to envision the sequel and invest in a strategic startup.
On January 7th, they both decided to take part in a roundtable for the American startup TaxBit, which specializes in the automation of tasks related to tax compliance for digital assets.
The amount that PayPal and Coinbase Venture invested in the startup was not disclosed. For TaxBit, this investment in the company will reinforce an important point in the introduction of cryptocurrencies, as the authorities are becoming increasingly sensitive in this area. More and more individuals and professionals own large sums of digital currency, and each country will regulate foreign exchange transactions in fiat currencies in its own way.
Discover our guide on how to declare your cryptocurrencies for tax in 2021 here.
Tax on cryptocurrencies
In the USA, pressure from the authorities had already started in 2019. The Internal Revenue Service (IRS), the US tax collector, had advised cryptocurrency holders to report their assets to the government. Since then, it has been certain that the organization has prepared for crackdown on uncontrolled profits and has increased its intransigence.
In an article posted on the Law360 website, a former IRS official spoke of the shift in the U.S. tax industry in full swing. If the agency has had an « educational » attitude towards cryptocurrency owners in the past, 2021 will make it more difficult. « The IRS has not positioned itself for a smooth transition from education to enforcement in 2021 and beyond, » he said in an article. The man was preparing for a new trend:
« Although the IRS has announced numerous cases of tax evasion or money laundering related to virtual currency, this trend is expected to change in 2021. »
For Coinbase, the most important crypto shopping and storage platform to date (30 million customers), this tightening of the rules will make sense when the platform was forced to shut down its service for 13,000 customers who were not in good shape for tax purposes in 2018.
TaxBit operates in the US but intends to expand internationally. The solution to automate these tax rules, be it for the customer, the shopping platform or the payment service, could very soon be deployed in the UK, Canada and Australia.
Coinbase and Paypal work internationally and in particular in Europe and France. It is likely that due to the legal emergency, they will need to provide solutions and warnings quickly. Otherwise the problem could surely go beyond « only » 13,000 customers.