- IMF states that crypto ownership runs to tens of billions of dollars and is concentrated at the top, with most crypto investors having moderate incomes.
- “Cryptocurrencies are the most common types of digital assets, and they were designed to facilitate tax evasion” IMF report
- The International Monetary Fund has a significant influence on countries across the globe. Over 95 countries owe the international organization over US$114 billion as of May 31, 2023
IMF report on crypto taxation
The International Monetary Fund has published a report, “Taxing Cryptocurrencies” that intends to design a route map to more crypto taxation. They state that policymakers are struggling to accommodate cryptocurrencies within their tax systems. Governments have noticed a design problem, where cryptocurrencies have a dual nature, as investments assets and as a means of payment.
IMF states that crypto ownership runs to tens of billions of dollars and is concentrated at the top. Most crypto investors have moderate incomes. There are over 1200 crypto millionaires in the United States, and roughly over 48, 000 globally.
As a result, crypto taxation will cut across any crypto activities; unreported crypto gains, and crypto mining. The focus is more on crypto mining, the reason being that it is carbon intensive. “More straightforward is a compelling case for corrective taxation of carbon-intensive mining.”
IMF published an earlier report on the tactics they will use to extract the taxes. The report foreshadows a possible crackdown on crypto revenues of all kinds.
The report stated that anti-money laundering rules would not deal with tax cheats who hide under crypto, and something more has to be done to prevent crypto theft.
Implications of the IMF stance on global cryptocurrency adoption
The International Monetary Fund has a significant influence on countries across the globe. Over 95 countries owe the international organization over US$114 billion as of May 31, 2023. The loans come with loads of conditions, among them discouraging the adoption of cryptocurrencies. This year, the Argentinian Senate approved a US$45 billion loan that discouraged crypto usage in the country. Africa also stands most affected by the stringent rules, as most of them have struggling economies that heavily rely on international loan support.
The United States’ influence on IMF loan conditions
The IMF operation rules come from the voting countries, the largest being the United States of America. Recently, the US has been accused of controlling international organizations, including the World Bank. The world’s largest economy has on several occasions stood its ground against cryptocurrencies and their influence seeps through the IMF response system.
The report goes ahead to refer to crypto’s growth as ‘growing in a rather wild and uncontrolled way’. The author estimates that crypto holders exceed 400 million globally, with a market cap of only three per cent of all stocks. In rather unfriendly sentiments, the report reads in part:
The deepest scam of all, to critics, is that all this is based on assets whose creation creates significant environmental damage and, in many cases has no intrinsic value.
Some would argue that crypto requires its regulations but it is clear that regulators intend to fix them into existing tax regulations. The report also cites research from the Bank of International Settlements, Bank of Central Banks, which states that 75 per cent of crypto traders have lost money.
Crypto context as per IMF report
NFTs and Central Bank Digital Currencies are on the extreme side of the crypto spectrum, according to IMF. Non-Fungible Tokens should be taxed as assets, while CBDCs as currencies. Cryptocurrencies are the most common types of digital assets, and they were designed to facilitate tax evasion. However, they are highly traceable;
A second important feature of cryptocurrencies is that, unlike cash, they are remarkably transparent in the sense that these and other details of all transactions on a particular coin are publicly available.
The possibility of connecting wallet addresses to identities is possible;
Those likely held by exchanges, for example, or those likely held by miners, those involved in ransomware attacks, or those having a close connection with the darknet.
The report urges that crypto laws need to be international because of crypto’s international nature.
IMF Crypto statistics
There are three ways to trade cryptocurrencies; peer-to-peer, through a decentralized exchange, or a centralized exchange. Crypto payments are not prevalent yet but they are growing in popularity. Cryptocurrencies are more common in Vietnam. The country with the most crypto users as a percentage of the population is UAE at 28 per cent. Vietnam follows at 26 per cent and the US at 13 per cent.
The report states that there are over 1200 crypto millionaires in the United States, and roughly over 48, 000 globally. A whopping two-thirds of them hold half of their entire wealth in cryptocurrencies. There is a high potential of revenue on crypto taxation. The IMF is throwing in a keener look into how to tax the ecosystem.