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Cryptos and the Common Reporting Standard (CRS)

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arbusers
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Cryptos and the Common Reporting Standard (CRS)

Mon Dec 12, 2022 4:27 am

The Common Reporting Standard (CRS) was designed to promote tax transparency with respect to financial accounts belonging to individuals held abroad. The CRS was adopted in 2014 and came into effect in January 2016. The first data was shared among tax authorities globally in 2017. Let me make it crystal clear how it works with an example. A French citizen living in France, has a bank account in Switzerland in a Swiss bank. The Swiss Bank will share information with the Swiss Tax Authorities, and the Swiss Tax Authorities will send this information to the French Tax Authorities. Then the French Tax Authorities will check if the French citizen declared the bank account together with potential incomes.

So far, the CRS didn’t really care about e-money and crypto assets. With the new amendments the CRS will include in his scope all e-money and crypto assets. How would that work? I will again provide an example to make it crystal clear for you. An Italian citizen, living in Italy, uses an exchange (like Kraken or coinbase) to buy and sell cryptocurrencies. This exchange will be required to get a license from an EU country in order to operate legally within the EU. Let’s suppose this exchange got a license from Ireland. At the end of every year, the exchange will share information with the Irish Tax Authorities, and then, the Irish Tax Authorities will send this information to the Italian Tax Authorities to comply with the CRS. The Italian Tax Authorities will then check if the Italian citizen declared his accounts and all potential profits coming from them.

As you understand care free days will soon be gone for a number of Crypto enthusiasts. But when is the starting point of the CRS in cryptos and e-money? Well, here is the timeline of the CRS implementation:
1. All EU member states will have to pass all required law before 31st of December 2025
2. Exchanges will collect and share data starting from 1st of January 2026.
3. Exchanges will share this data after January 1st 2027, in the same manner like all other reportable data.

And if you think this is only for EU nationals, think twice. The CRS is active in more than 100 countries worldwide. Have no doubt, many other countries will follow the European paradigm. Have also in mind that G7 leaders approved this plan. Today, (December 2022), the Directive is still open for discussion and debate, but practise has shown it is only pretentious. This Directive will go as it is right now, with minor changes as a fig tree's leaf. I know there are extremely complex schemes in Cryptosphere. It might look like chaos in the beginning but in the end, as Franklin put it, nothing is certain except death and taxes.

In my opinion, countries with a deeply rooted and established anti-tax and corrupted mentality will benefit from this. It is my guess that many Crypto enthusiasts will be caught by surprise and they will find them selves in front of various dilemmas. Run to hide, or comply and pay.

In regards to e-money, our forum was the first to start the discussion back in the days (which is still ongoing), when absolutely no-one knew what was about to happen, and all actors were playing deaf mute on purpose or out of naivety.
ajeto
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Re: Cryptos and the Common Reporting Standard (CRS)

Mon Dec 12, 2022 10:31 am

Already all regulated exchanges do full KYC and are reporting transactions if there is a legal demand for it, they are also blocking transactions. IE Tornado cash, Binance/Coinbase blocking Russians....etc. After 2025 seems that there will be some more automation to this reporting process, but the taxation itself is not same in EU member states, so it will be difficult to implement something like that. Time will tell what will be the outcome and the final version of this regulation. One is sure, if regulation is too strict or if regulation wants to ban something, ppl will likely find a way around. And now we have more tools than ever to do it.
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Re: Cryptos and the Common Reporting Standard (CRS)

Mon Dec 12, 2022 4:04 pm

ajeto wrote:
Mon Dec 12, 2022 10:31 am
so it will be difficult to implement something like that.

It is already implemented with bank accounts. The way I see it, is a challenge for the Directive to find ways to stop the exchanges that will stay out of CRS jurisdictions. In addition, cold wallets can not be stopped. Some people will move to cold wallets and will then conduct only P2P transactions without the intervention of an exchange.

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