Taxation: soon taxes payable in cryptocurrencies?

During the banking symposium “Web3” of the NGO, which was held in Geneva last week, Europe has confirmed its lead with regard to the integration of crypto-finance into traditional banking systems. Pay your taxes with digital currencies? It is now possible in Switzerland.

In recent months, traditional banks around the world have been in a frantic race to adapt to digital assets, particularly cryptocurrencies, so as not to be left behind in an ever-changing financial landscape.

To date, Europe is in the lead, with Switzerland at the head of the pack: in fact, some of its residents can already pay for their coffee, but also their taxes, in cryptocurrencies. At the same time, the European Union is closing its regulatory gap and proposing legislation on crypto-assets, the entry into force of which is normally scheduled for January 1, 2025.

According to Crypto Valley Association board member Ilya Volkov, “Europe has become one of the leaders in this area, particularly regarding the regulatory framework for crypto-assets”.

Although participants at the “Web3” banking symposium are aware that much remains to be done to fully exploit the potential of cryptocurrencies, they are already envisioning many roles in which they could flourish, mainly in the areas of payments and investments. However, for them to be adopted on a wider scale in these sectors, it will be necessary to integrate them into the traditional financial system with flexible regulations ensuring security.

“It’s a question of compliance requirements”says Ilya Volkov. “When it comes to traditional financial institutions, traditional banks, they follow complex regulatory requirements around anti-money laundering or customer verification procedures”.

Concerning Switzerland, the country has already implemented a specific license for cryptocurrencies. This initiative requires companies operating in this sector to obtain a license in accordance with anti-money laundering regulations.

Currently, the Swiss canton of Zug is positioning itself as one of the fastest growing destinations for new cryptocurrency businesses, allowing local residents and businesses to pay their taxes with digital currencies.

Martin Burri from PwC Switzerland says that income taxes in Zug can be paid in Bitcoin or Ethereum up to an amount of 1.56 million euros.

“Despite everything, the tax base is determined in Swiss francs and is then converted into cryptocurrency”he specifies. “And I expect these rules to stay in place for a long time.”

Another interesting example: Lugano, in the canton of Ticino. The municipality has recently extended the range of municipal taxes and fees that can be paid in cryptocurrencies. The city now accepts Bitcoin (BTC) and Tether (USDT) for these types of payments. This initiative proves to be highly beneficial for the city's residents, who are already familiar with cryptocurrencies. In fact, around 15% of residents use them daily, while more than 300 businesses and establishments, including restaurants, accept these payment methods.

Despite these positive points, a crucial question remains unanswered in European regulations: what will happen in the event of the bankruptcy of a financial institution regarding bitcoins held by customers?

This uncertainty, raised by Cecilia Peregrina, lawyer specializing in banking and financial law, raises many concerns about the protection of investments in cryptocurrencies during periods of financial crisis.

Faced with these regulatory challenges, it becomes imperative for European authorities to provide clarifications and adequate protection measures to guarantee stability and confidence in the cryptocurrency sector.

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