Understanding Global Tax Reporting for Digital Assets: Insights from TaxBit Leadership

good morning good afternoon and good evening my name is Diana barrero ales and I am a global blockchain business

council's head of research and sustainability it is my pleasure today to welcome you to gbb's Virtual members

Forum on how tax reporting requirements are changing the way we think of digital asset compliance this is a bi-weekly

webinar showcasing the innov work of our members around the world and today we are joined by John Shiner head of policy

at taxbit gbbc member tax bit is an endtoend compliance and Reporting solution for the digital economy tax

bit's single API powered platform for tax and accounting reduces manual work improves operational efficiency and more

briefly be before we begin I'd like to introduce John also and John Shiner as we said head of policy at taxbit um

works as uh with a leading SAS provider to Enterprise and governments helping them manage information involving

digital assets for tax and accounting purposes he joined tax bit in April of 2022 bringing with with him a background

in tax policy investigations and litigation before that John was a senior investigative Council for Senator

Charles Grassley on the US Senate committee on finance where he led the committee's 2020 bipartisan

investigation into syndicated conservation easement transactions and was the primary author of that

investigation's report prior to that he was C to US House ways and means committee

chairman Kevin Brady during the 2017 tax reform effort from 2007 to 2015 John was a trial attorney for the

US Department of justices tax division where he litigated high-profile shelter cases most notably the Stars foreign tax

credit generator transaction he has been a contributor to a leading us tax publication and guest lecturer on the

taxation of digital assets and John graduated from Northwestern University's law school and the medle school of

Journalism as an undergraduate thank you John for joining us um we welcome the audience's questions at any point during

today's presentation please submit them in the Q&A tab at the bottom of your Zoom screen and we will take them after

the presentation John I will now hand things over to you to begin thank you very much Diana and thank you all for

joining us today I appreciate you taking the time to talk with me and to talk about uh taxes and tax reporting in this

space it's a growing area and it's going to become increasingly more part of everybody's Focus next year in the out

years throughout the rest of this decade so thank you very much as Diana mentioned I'm a former tax staffer for

the US Congress I was there in 2017 when the United States Congress passed the last big tax bill which it's going to do

again next year coming up so it's going to be a really interesting time in the United States for taxes including in the

digital asset space as it already is for tax reporting which we're going to talk about today um one bit of disappointment

that I'll share with you is that I am doing this solo uh my colleague Max Bar who is uh in certain respects my

counterpart in Europe he's our managing director in Europe is unable to join us today because he's frankly on a flight

that was dramatically delayed so I apologize for that that's me I'm the head of policy of tax bit and that's my

colleague Dr Max Bar uh again managing director for Tax bit in Europe um obviously he won't be on the call today

but if you don't already know Max um and you're in especially if you're in Europe I I strongly recommend getting to know

him he is a wonderful colleague to have and he is a terrific person to get to know and I encourage all of you to get

to know him and I'd like to get to know you as well um so today let's talk about global tax information reporting and

before I get started in Earnest um I will make a pitch to everybody um who may not have heard this pitch before

which is tax is more interesting than you think it is most of the time when people hear tax they're like oh God I

have to talk about that I really don't want to have to talk about it how long is this meeting going to go for um tax

information reporting is obviously not a profit center it's a compliance issue and we are more than happy to help you

work through it um but talking tax is fun if anybody wants to talk tax with me afterwards I'm happy to do that with you

but for now let's talk about global tax information reporting and let's start with carf carf is an acronym that you

probably heard about in the last couple years it stands for crypto asset reporting framework it is the framework

adopted by the oecd about two years ago covering how jurisdictions throughout the world should do tax

information reporting to basically close tax gaps throughout the World um with regard to digital assets this is an area

that governments throughout the world are still trying to get their heads around in the United States and other

countries as well we're just on The Cutting Edge of this and this is frankly your chance to be involved in those

discussions as to how individual countries do tax reporting um because they're still trying to Kind of Perfect

it carf is the framework they use for implementing at the local level outside the United States um but when it comes

to best practices and how to do it this is still your chance to get in at the ground level and say this way is better

than this way and we can help you do that because that's our business under carf let's talk technicalities under

carf what entities have to do reporting under carf um what assets are included what type of transactions are included

in that let's start with entities um carf uses the term Casp and sometimes RCP R Casp stands for reporting crypto

asset service provider which is basically um any exchange or any entity that brings buyers and sellers and

Traders of digital assets together which beget what are usually taxable events if if any entity falls under that category

chances are they are an rasp or a Casp um that covers what what crypto assets does that cover I'm going down to the

next row there payment tokens car refers to basic traditional cryptocurrencies like Bitcoin and ether as payment tokens

it also includes what we commonly refer to as stable coins what they refer to as asset reference tokens as reportable

entities sometimes and um this is a bigger discussion perhaps for afterwards sometimes those fall into um a previous

incarnation of reporting in Europe known as Dax 7 um we'll talk a little bit about Dak 8 which applies to digital

assets um which is really the the application in the European Union of carf um but either way stable coins are

covered one way or another um crypto assets also include debt and Equity tokens basically classic traditional

Finance debt and Equity that is tokenized that's the same way as in the United States as well as certain

nfts carf covers um and requires the reporting of basically nfts that are Financial in nature um and that's

something that doesn't kind of beget a real clear line in the United States uh the Department of Treasury wrestled with

that too do we require nfts to report or not sometimes they're financial instruments that people use for

investment purposes and sometimes they're just fun things to own which aren't quite as Financial in nature um

basically carf says to jurisdictions to the extent nfts are Financial in nature they are covered

assets that are part of tax reporting and what transactions of these crypto assets are covered under tax reporting

um first and perhaps most obviously exchanges between reportable crypto assets and fiat currency buying and

selling cryptocurrency with with cash um exchanges between one or more reportable assets going from asset to asset trading

that's also generally a taxable event it certainly is in the United States and is generally a reportable transaction in

other jurisdictions um it also requires and we can go into greater depth on this if you

want to to transfers of reportable crypto assets between wallets such as going from an exchange or a hosted

platform to a cold wallet um this is sort of a new thing when it comes to the world of tax reporting it's it's a a

very centralized part of our ecosystem but to the extent jurisdictions are trying to figure out

how to deal with this in a traditional Finance framework when it comes to tax reporting that's kind of a tough one

because it's not I don't want to say it's not common but it's not a big part of the traditional Finance ecosystem

usually when you hold assets on your brokerage account or something you leave them there and you don't transfer them

you can transfer them and you do transfer them but it's not something you routinely do probably well in this

ecosystem you do and that is Central to exchange of information for tax purposes because you got to know where stuff is

coming from and where it's going to and what its cost basis was and what the proceeds are from that and so that's

something that jurisdictions are wrestling with and that's something that's going to be handled at the

reporting levels in the years to come throughout this decade and finally under carf I value retail payment transactions

where you're buying a good or service for more than 50,000 us worth of digital assets that's reportable that's actually

a pretty high threshold compared to what the United States is doing um the United States generally requires reporting of

all transactions um with certain thresholds for types of assets used or in certain

situations whether the broker fits into certain category or not but for the most part all transactions in the United

States are reportable and I'll get to that a little later moving on um how does carf work what does carf require um

you if you're an rcast to do and and this is generally the same sort of thing that's going to happen throughout the

world whether it's carf or the United States and the one of the first things you have to do is basically know who

your customers are kyc as we like to call it in the United States and probably in in other jurisdictions as

well you generally have to know what the name of the person is um the name of your customer where that person is

sitting and what that person's tax identification number what we most commonly know in the United States is a

social security number what is that person's tax identification number so that you can do tax information

reporting on that entity um once you have that information in place and this is something I will say we can help you

with um once you have that information in place under carf um what you're generally going to

be doing is annual annual reporting on an aggregate basis by type of crypto asset distinguishing between outward and

inward transactions whether remittance is coming into the customer in the country or going out to another country

as well as making a distinction between crypto to crypto and crypt to Fiat transactions um going down to the third

bullet point these transactions for carf purposes are to be reported on an aggregate basis with number of

transferred units and reportable transactions to be reported um and types of transactions where known also have to

be divided up is something in airdrop or is it income from staking or lending or is it something similar to that that's

the report that's the sort of thing that needs to be broken down even though aggregated um a central Focus to

this is tax authorities in one jurisdiction eventually really by 2028 sharing information with partner

jurisdictions the idea being I am sitting in jurisdiction a but I know that I have a customer who is in

jurisdiction B so I'm going to be collecting that information providing that information

to my authorities in jurisdiction a and then the authorities in jurisdiction a share that information

with the authorities in jurisdiction B that's not happening yet it's not happening yet in the United States but

by the end of the decade that's the idea and that's really building on um the automatic exchange of information

protocols that have been happening outside the digital asset world really for the last 10 years in traditional

fund finance and traditional Banking and the like and what carf is doing is applying tax reporting for digital

assets to that regime generally to normalize it um the purpose perhaps obviously is for tax authorities to

identify tax non-compliance so that they can enforce their tax laws within their jurisdiction um carf is really a risk

assessment tool um designed to figure out where the biggest areas of non-compliance are so that they can go

further into saying okay this person this person and this person um we need more information on this person this

person and this person because we think that's the biggest area of non-compliance um and this is really

going to be part of kind of and there's you know obviously there's some push back to this obviously

but normalizing the sector bringing it into compliance with other traditional Finance areas that have been doing this

for several years now for carf what is the first deadline to care about um on January 21st the idea is that um our

casps crypto asset service providers will be collecting information on their customers as of January 1st 2026 so that

they can report that year's information to their local jurisdictions in 2027 um in the last year or so um all

the oecd nations and several other all the I'm sorry all the European Union Nations and several other oecd nations

signed on agreeing to implement carar and their local laws by the end of December next year in 2025 so there's

that it's going to happen but there's still time to kind of get your heads around it work within your own systems

to get it up and running and that sort of thing moving along uh in the European Union when you hear the term Dak 8 dac8

which is really the Seventh Amendment to the automatic exchange information protocols that I was talking about

before DAC 8 is the application of carf within the European Union it transposes carf into EU Law requires reporting on

EU client transactions regardless of place of business again the idea is that if you're servicing a EU customer

someone sitting in an EU jurisdiction and you're not an EU jurisdiction eventually you will be

reporting to your local authorities who will then report to that respective EU jurisdiction on what this person does

and obviously this is aimed at combating tax evasion and fraud within this ecosystem just like this regime has been

doing in the traditional Finance sector for about 10 years now um who does it affect obviously it affects crypto

exchanges custodians and wallet providers and what sorts of information do they have to

provide um as I mentioned before the three key ones things you have to know about everybody eventually are name

address and the person's tax identification number um what sorts of information about their transactions

will have to be reported on numbers of transactions asset types and balances of accounts for information uh for

customers as well as dates types and values of transactions when it comes to the details of those

transactions let me get to my wheelhouse here which is us ta reporting I have basically done nothing but think about

this for the last two and a half years um generally think about the United States as

being one year um before the rest of the world as I mentioned before um oecd jurisdictions

uh EU jurisdictions to the extent they adopt this to the extent they adopt carf on time they will casps in those

jurisdictions will generally start tracking have to start tracking what their customers do as of January 1st

2026 in the United States certain Brokers as we call them um will have to start doing that this

coming January 1st in 20125 so that they can do the very first tax reporting what we call form

1099 excuse me tax reporting in early 2026 we're one year ahead of everybody else so we're kind of the the analogy we

say here we're the canary and the coal mine we're the ones going first to figure out what to do and how to do it

just a little timeline for you um one of the questions that I that may be coming is are jurisdictions on time and I kind

of chuckled when I saw that question because well depending on your perspective yes they're on time but the

United States is actually two years behind what it was supposed to do this is a requirement that um the US Congress

put into effect three years ago now in 2021 saying all right all you Brokers of digital assets

start collecting your customers information in 2023 so that you can report it in

2024 um the US Treasury Department um um right before that was supposed to happen

put out a notice saying we haven't put out regulations specifically saying how to do this yet so don't do anything

until we put out final regulations on on that well when did that happen excuse me in August of last year in 2023 they put

out proposed regulations on how to do this and some of you might have commented on that they didn't put out

the first batch of final regulations until late June of this year um specifically saying okay now in

2025 Brokers of digital assets start reporting or start collecting information so that in 2026 you can

start reporting them on those and what is required in the United States by us Brokers of us taxpayers is digital asset

gross proceeds not cost bases but gross proceeds gross proceeds if you don't know is just hey Max how are you um

gross proceeds is just a tax way of saying what did someone get for selling digital assets what what was their

proceeds amount cost basis is what did they originally pay for those assets in the first place and that's reporting

that will eventually come but a year later in 2027

um additionally um in 2026 and I'll get into a little more details of this in a second um customers will have or brokers

in the United States will have to know who their customers are with greater specificity As Time Goes On by

2027 us Brokers serving us customers will have to have certified knowledge of what their tax information numbers are

what their Social Security numbers are we can get into that in a second um the big thing in the United States the big

debate um at the legislative and administrative level is who is a broker in the first

place um there's not much debate that what we generally refer to as centralized exchanges entities that take

your Fiat money and give you an account on the platform know who you are and let you use that account to buy sell digital

assets are Brokers under us law what has always been more controversial is do protocols that don't

do that that don't take your cash that aren't known as on and off ramps are those

Brokers and in proposed regulations and in final regulations the US Treasury Department has said yes what you guys

call defi decentralized Finance your broker is under the law too and you will have to do tax

reporting but not yet and the first batch of final regulations saying how to do tax reporting in the United States

which came out this past summer only apply to what's known as custodial Brokers Brokers that in some way shape

or form take private keys from users and hold them in some way shape or form what does that specifically mean that means

quote to quote from the US regulations digital asset industry participants that custody the private keys for digital

assets being sold by their customer customers such as operators of custodial digital asset trading

platforms digital asset hosted wallet providers processors of digital asset payments what we call a paap if you hear

the phrase peap that's what that means and persons that accept digital assets as payments for real estate and issuers

of digital assets that offer to redeem those digital assets are covered by the first batch the last category there

basically means stable coin issuers and we can talk about that more too if you like um so so

again defy decentralized entities that don't hold private keys for users are not covered yet um treasury officials

have publicly stated that they want to get final regulations out by the end of this year on how defi will have to

report so we're fairely certain they're going to have to report it's a virtual certainty but not yet and almost

certainly not they will not have to start tracking their customers assets um their customers trades in

2025 um moving along um again it starts John John maybe I can I can jump in quickly actually I joined uh just I'm

very very sorry everyone that I joined so late um I I just arrived at the airport my flight was three and a half

hours delayed so uh just to add to the discussion that John just mentioned because I mean the topic of

decentralized Finance being reportable under 1099 day and also under the crypto a reporting framework it's a very Hot

Topic at the moment and basically what we are seeing is that also the US um delegations at working Party 10 were

really the ones that were pushing for clarification of this issue on the level of the oecd so just recently the oecd

issued its uh uh FAQs for the implementation of the crypto asset reporting framework and there under at

first they had included non-custodial exchanges including decentralized exchanges being reportable under the

crypto asset reporting framework then when they finally issued the FAQ they took out the wording decentralized

exchanges so right now only non-custodial exchanges are covered but then again um the oecd is currently

working on uh more comprehensive FAQ answering this question and basically drawing from the definitions uh of the

bank of international settlement that really uh divided decentralized Finance into three distinct layers namely

settlement layer application layer and interface layer and then the question which of these layers would be required

to report on the crypto asset reporting framework just wanted to quickly add that here because I think uh also from

the side of the us when we will see a consensus on this on the level of the oecd this will also trickle down to the

United States thanks John yes absolutely and thanks I'm we're I'm thrilled that you got to join us Max thank you so much

um getting back to the United States um there um as as treasury often does as the US Treasury Department often does

they provided um transition relief helping you go from not having to do anything to having to comply and so that

there are as few hiccups as possible in people trying to comply but mistakes will be made and the two big ones are

some things I want to go over for you um penalty waivers in 2025 under the US tax code and this has been in place for

years there are there are different levels of penalty per form 1099 that have mistakes

on it there are a couple dollars and depending on how Grievous the mistake is the the penalties get higher obviously

if you make a mistake you're making a mistake at the level of thousands or Millions not one or two um so penalties

can be pretty stiff what the US Treasury Department has said they made this official okay for all Brokers that have

to do reporting if you make a good faith effort to comply for tax year 2025 on time we will wave all penalties if you

don't bother complying penalties apply but if you make a good faith effort to comply and make mistakes in doing so

penalties are waves so what I tell other people is to think of 2025 as what you know the theater Community call a dress

rehearsal this is your time to try your best try to perform as well as you can and if mistakes are made here and there

it's it's fine learn from those mistakes and move on the second big thing um and this is this is a big deal is that

backup withholding is not required in 2025 and this is getting a little technical taxes um what this means

is in US tax code for any entity that has to do tax reporting on a customer who does not have a certified

tax identification for that customer can still service that customer but they don't get out from

reporting on that Customer because they don't have their social security number what they have to do instead is they

basically said to the customer we don't you're not telling us the Social Security number so we're going to

withhold 24% of the proceeds that you made on this transaction and pay it to the IRS pay it to the Internal Revenue

Service and then you can deal with that on your own tax return we paid it for you already because we couldn't do tax

reporting on you well one of the biggest logistic iCal lifts that brokers in the space will

have to do especially with their existing customers who may not have provided them with a certified tax

identification number is say to them when they log in okay we know who you are and we think we know where you live

but you got to tell us a certified tax identification number you have to certify your social security number to

us and the problem with that and this is a problem that other jurisdictions you know are cast in other jurisdictions

will have as well is getting those customers to actually do it what this will probably mean is a pop-up window

saying hi welcome back to the platform please give us your social security number then the user clicks the X and

gets rid of that pop-up window I'll do that later if I ever do it eventually The Entity has to do tax

reporting on on customers who don't do that or not tax reporting tax withholding on customers who don't do

that but what the treasury Department has said in the United States is we get it we know that takes some some time to

get your existing customers to give you this information so we're giving you considering these came out in September

18 months at least sort of to do this so that you don't have to do it by this coming January 1st 2025 if someone

doesn't certify if a customer of yours doesn't certify to their social security number by January 1st of this coming

year you don't yet have to do tax reporting on that person so that's a big big kind of C belief for brokers in the

United States um and finally real quick what goes on a form 1099 da in the United States obviously name address and

Tin um similar to what's in car jurisdictions digital asset name quantity um sale date and time the time

they were is something they were going to require but in final regulations said no you don't have to give us the time we

get it that's a little too detail oriented gross proceeds at first um transaction ID just like time

transaction ID and wallet addresses were something they had proposed collecting um but pulled back on in final

regulations saying okay don't put that on the form but do keep that information for seven years if we need it um and

finally is the sale for cash cards payment cards services or property um and then information that um has to be

collected um transfer date collected eventually transfer date and time transfer transactions transfer from

wallet addresses and transfer quantity coming down the pipe in the future um 1099s will well not in 1099s but on on

forms known as transfer statements will have to be provided to the Internal Revenue Service if a broker transfers in

uh assets for a customer to an entity that it knows is not a reporting broker like a cold wallet or something like

that um that's the information that we can get into for now um we can talk much more about this um please

reach out to us um if you want to um Max's email is right there so is mine it's very simple Maxx bit.com or johnx

bit.com and we are more than happy to U take your questions and help you with any questions you may have including

right now so I guess Diana I'll hand it back to you thank you so much John for your

presentation and thank you Max what a wonderful surprise to have you join us to jump in and and share your insights

as well we really appreciate this presentation about really the importance of tax reporting updates and the

significance of carf as the crypto asset reporting framework again I'm Diana head of research and sustainability and we're

going to take questions the first of which I wanted to start we mentioned all the benefits and all the

but what can you say would be the roadblocks in implementation and what are the best ways to address them at

this point um the biggest roadblock and obviously Max might chime in here too but um it is it is a technological lift

and we can help you with that um gathering information two things um and the first we can we can help you with

both but the first is often times especially custodial Brokers custodial casps have the information they need to

report but it's in disparate places some information might be in a marketing database some information might be in

some other database and what you need to do is bring all that information together so that you can collect it in

one homogenized way going forward so that tax reporting becomes more routine easier to do than it is at first and

that's something we can help you with the second thing again that you need to get your heads around are saying to your

existing customers um it's going to take some time because it requires effort on their

part it's going to require their willingness to give you this information at the outset okay again you have to say

to them I know who you are please update your name if it's wrong um update your email address but update your address

and we need your tax identification number this is something that obviously people on this call will understand is

not something customers are eager to give but it's generally something you're going to have to get so so take this

time to start collecting that information and this is something we can help you do as well if you have

questions on that Max do you have anything to add to that yes I think the I think the issue of the self

certification the resell certification of pre-existing customers is one of the biggest pain points we see as of today

because especially I mean that it's one point to implement that in the United States but it's another point to

implement that on a global scale since there will different kyc requirements maybe across jurisdictions and as we see

right now with the implementation of theca um self certification of customers can

be up like between anywhere between four and 10 per person so very very expensive on the on the kyc and certification part

so this is something that we are trying to work on the level of the o to make this very stream line uh and this is

where we at txp can really help our customers as well in this process of onboarding clients and we be using the

like getting prepared for the cryp AET reporting framework as John mentioned as well

yes so helpful so moving on to a next audience audience question can you talk through the ongoing discussion of crypto

as a security commodity or currency or what it is from a tax point of view you're laughing so you probably have a

lot to say um I this is not I am not a Securities lawyer I'm never going to be

a Securities lawyer and so and and tax bit is quite neutral on this this topic it's a topic that dominates the policy

World in this area in the United States and we generally stay out of it so I'm going to try to stay out of it here too

um what I can say is that um when it comes to I if if there's one thing that I think is worth noting from a tax

perspective which is when you see the word Security in the US tax code in title

26 um it generally does not have the same definition generally as the word Security in our Securities laws

generally in the US tax code and don't write this down and give it to a client this is not legal advice but Securities

is synonymous with the word bond in the US tax code so when they say stocks and securities what they're sometimes saying

is stocks and bonds generally um and so that applies to things like wash sales uh which is a

going to be a Hot Topic in 2025 for tax purposes can you acrw tax benefit by engaging in a wash sale at the moment

you can because for tax purposes digital assets are generally not Securities that's not to say they're

not Securities for Securities laws purposes but for tax purposes they're generally not in the United States so

that's a hiccup that you might see and have questions about and maybe looking on a more

International scale there is no uniform sec security law globally right even within the European Union each every

like every member state in jurisdiction has different security laws so the question is what really Falls in Europe

under miid what would be falling under MAA because yes um for financial instruments or for for crypto assets and

then again the crypto asset reporting framework in 1099 da ultimately are reach just

reporting requirements they don't cover taxation as per se right so I think this is is also very very important highlight

because they where like especially in the max we lost you for a little bit well I would encourage everybody to

reach back out to Max and ask him to finish up on this question because you will love talking to Max yep let's keep

going to the next question and if we get Max back we'll have him finish his point next question is do you think the tax

authorities have the staff and are ready for crypto reporting requirements and what about

enforcement um in the united I can speak to the United States um I I I I I I will always say that the US Treasury um um

are staffed by the best Tax Professionals in the United States and the IRS as well and so um yes I do think

they'll be up and ready um there have been um some reports talking about and you your your audience may have seen

this this some reports by an entity called Tiga saying the criminal side the criminal investigators in the IRS have

done more in this area than the Civil side has

um I attribute that mostly to generally a lack of tax reporting the IRS has been active in this space by summons and

exchanges over the last five six perhaps more years than that but generally there's not that much they can do until

the tax reporting goes into effect and so yes I think they'll be ready we still have some time too so

good point good point what about talking about and addressing the difference in tax requirements at a global level and

how could this potentially lead to tax Arbitrage um I think that's the point of of of carf to kind

of minimize those opportunities for it um I have I have spent a care career litigating from the United States

government um tax shelters which is basically tax shelters come in Broad categories and one of the categories I

put them in is basically tax Arbitrage um treating disparities from one jurisdiction to another jurisdiction and

playing those off of one another so you can get the maximum tax benefit from them um tax reporting really you know

it's about risk assessment as our slide showed but um the heart of it is really about I would say

um treating jurisdictions similarly in terms of the information that they get um so that there's is little possibility

for that out there um it's a hard question to answer because you're essentially asking what

are jurisdictions going to do in the future I don't know and no one can say that for sure but um one thing that's

kind of clear is that all roads are kind of converging in the same place which is that there going to be fewer and fewer

places that don't require tax reporting in some way shape re form even if it's requiring someone in a jurisdiction that

just doesn't require tax reporting to have to do tax reporting on someone in another jurisdiction and so the chances

of entities not having to know a customer social security number tax identification number are going to be

smaller and smaller in the future Max your back do you have anything to add to that

yes unfortunately my Internet connect Internet connection um got cut off so yes what was the what was the

question talking through the difference in tax requirements globally and could this lead to potential tax

Arbitrage um I think that is what's happening as of now like globally anyways right um this always like even

in the European Union there's no uniform single regime prot tation across jurisdiction

uh and what the crypto asset reporting framework does it aligns information reporting requirements for service

providers on crypto related activities of their users but it does not solve the issue of of regulatory Arbitrage in

terms of Taxation because still there will be a run to jurisdictions with lower tax rates like we have seen in

traditional Finance as well so the question is really um is that the goal of the crypto reporting framework to

even tackle no it isn't but the crypto asset reporting framework it's just there to really counter the issue of the

lack of tax transparency so just um it's really about governments or tax administrations knowing about the

Holdings of their individual tax payers but it's ultimately not about solving an issue of like creating a uniform

taxation regime on crypto assets or anything blockchain related because uh I can say that with 100% certainty this is

not going to happen within the near future not even within the European Union yeah and also because we lost Max

and you were in the middle of saying a point I want to give you a chance to finish your point before we move to the

next question um I was just talking about Securities in in Europe and how like there's a big debate um also among

EUR European Union member states on how to qualify certain blockchain based assets right because it's it's also

important in the context of what should apply like the market in crypto asset regulation in short MAA or should it be

miit that is applied to those assets so um in terms of of security laws uh we don't even have a uniform consensus in

in Europe and we don't have something like the hoi test so uh it's it's it's very very it's very very tough to give

you a defintive answer on that right well moving on to the point of view of actual businesses this is

going to be our last question how does the addition of tax reporting requirements impact actual businesses

what new considerations does it raise new issues and and what do they need to do to prepare for

it um I would say um I would I would answer that by um answering with a discussion I have with policy makers in

Washington DC which is that and I sort of alluded to it in my last conversation which is is um business models are going

to more and more have to accept um one that knows who their customers are even if it's not just for tax purposes in the

United States Senate for the past year there's been a big debate should defi have to know who their customers are for

AML purposes um and it's a debate that's not settled under the framework uh under

under an AML perspective but what I point out to them is you know this this this question is being settled for tax

purposes for tax purposes those entities are more than likely in the coming years going to have to know who their

customers are is the information they're going to get for AML purposes different from tax purposes

maybe but you're still crossing that threshold of saying to your customers okay who are you and where do you live

and what's your tax identification number that is something that um and we're not saying it should happen that

way we're saying it's probably going to happen that way that's my view of the future in terms of business

models I agree with that I think that um through taxation information reporting requirements it will be a kyc plus that

is being introduced so basically um the the taxation information reporting requirements mainly built on the AML

reporting requirements so oecd is always looking at the standards of the financial action task force also for the

reporting of of Tex related matters um after all for the business model it's very very important for the service

providers to prepare for these requirements as soon as possible I mean like under dac8 um like on the contrary

to what John explained before with the United States for example in the European Union under the transposition

law of the trip reporting framework the soal dac8 we have the requirement for service providers to freeze uh accounts

from performing exchange transactions if they don't submit valid um sales certifications so um it will be very

very important for the business models for for operating service providers to do the kyc PS like in advance before

they actually enable transactions uh and then also it's it's just very very important

to have the right mechanisms in place to track transactions of the users right but this is something that they kind of

would need to do today anyways already but what they will be required to do um as soon as the information reporting

requirements kick in wonderful well we are out of time unfortunately so I will close it and say

thank you so much to John and thank you so much to Max I didn't get a chance to introduce you but Dr Max Burt is tax

bits managing director for Europe and I we're all glad that he made it to his final destination better late but than

never but and uh you made it safely and fine and and you us it was a great great surprise and great addition and thank

you thank you very much for hosting me and maybe just to highlight this um I I'm I just published also an article in

the new um International journal from from gbbc that is coming up next week next week on the crypto asset reporting

framework and its implications so who's interested I want to wanted to highlight this as well keep an eye on it because

we are definitely following this issue it's very important so again really appreciate you joining

us today for this thoughtful and engaging presentation and Q&A on crypto tax reporting and how organizations are

and should embrace it in the future we look forward to learning more about tax book progress and in the meantime we'll

read your article uh a recording of this presentation will be circulated to all those who registered and it will also be

shared publicly on gbb YouTube channels where we tend to get a lot of views after the fact thank you to

all the audience and have a wonderful day thank you very much thank you very much