We are witnessing a historic moment in terms of tokenization of the economy that many call the Web3 as an evolutionary stage of the Internet that began its development after the financial crisis of 2008 when the Bitcoin blockchain saw the light on 10/31/2008 , with the white paper by Satoshi Nakamoto.
Within this economy, asset tokenization is a process by which the value of a real-world asset (tangible or intangible) is digitized and becomes a token under representation on a blockchain.
But there are also utility tokens that grant rights of use or access, security tokens (similar to corporate participations), the asset tokens that represent an asset within which we can include the NFT or non-fungible tokens which are having an expansion amazing within the art world and also hybrid tokens as a combination of the above.
Faced with this phenomenon, the States are trying to regulate these operations, in the first place, to identify them in order to enhance them on the one hand, but on the other to protect consumers and avoid criminal acts added to their taxation, considering the current regulatory frameworks.
Regarding tax treatment, there is no uniform treatment in the different countries today, as the OECD warned last year in its report “Taxing Virtual Currencies”.
There it was said that for countries there are difficulties such as the absence of centralized control over cryptographic assets, pseudo anonymity, difficulties related to obtaining information on operations, valuation difficulties that mainly result from volatility and lack of a uniform database (there is no single listing market), this added to hybrid features, that is also the difficulties to classify a financial instrument or an intangible asset and of course the rapid development of the underlying technology (blockchain).
The FATF recognizes that virtual assets are an innovative technology to transfer value worldwide such as sending payments and reducing commissions, but permanently warns that through the use of them, crimes such as money laundering and financing can be committed. terrorism, drug trafficking, illegal arms smuggling, fraud, tax evasion, cyberattacks, evasion of sanctions, child exploitation and human trafficking.
He pointed out, among others, the following difficulties in their control: technological characteristics that increase anonymity, geographical risks and criminals can exploit countries with weak or non-existent national measures for virtual assets, transactions carried out in small quantities or in quantities below the amounts that Institutions must report when they find an alert (similar to the case of cash transactions), source of funds or wealth, which may be related to criminal activities.
It has recently updated its guide aimed at helping national authorities understand and develop responses to virtual asset activities and also assist private sector entities seeking to participate in the crypto ecosystem.
Provided guidelines to countries, competent authorities and industry for the design and implementation of risk prevention regulations and create a supervisory framework for the activities of virtual assets and service providers and virtual assets, including the application of preventive measures such as due diligence of the client, record keeping, suspicious transaction reporting and updating of the virtual activity and service provider database.
In the same exchanges or virtual asset service providers (VASP) are obliged to report operations both to the Organizations in charge of the fight against money laundering and the financing of terrorism as well as to the Tax Administrations themselves (AATT).
The great limitation that the States have is that they only have the power to demand that the subjects residing in the countries, whether they are exchanges or the VASPs, report operations with crypto assets, but they do not have the power to regulate these information regimes by forcing non-resident subjects to report such operations.
In short, today countries do not have information on operations carried out through exchanges located abroad since they do not have the obligation to share information with Central Banks, Tax Administrations or other public bodies.
For this reason, the OECD promoted an initiative to collect information on these assets at the national level in order to exchange it, taking advantage of the experience of the automatic exchange of financial accounts, according to the “Common Reporting Standard” (CRS) that has been operating since 2017, increasing year after year the intervening countries. accounts reached and amounts covered.
Recall that the CRS encourages jurisdictions to obtain information about their financial institutions and to automatically exchange this information with other jurisdictions annually. It defines the type of financial information that must be exchanged, the financial institutions called upon to transmit said information, the different types of accounts, the taxpayers involved, as well as the common reasonable diligence procedures that financial institutions must follow.
In this regard, I believe that this is a good initiative by including operations with crypto assets within the CRS information regime, thus forcing them to be reported to exchanges and virtual asset service providers.
As long as this does not happen, we will continue to see a proliferation of information regimes in different countries, which will also become complex for the actors that carry out operations in many countries.
I believe that in the face of global phenomena such as the ones we are experiencing, the path of cooperation / collaboration and multilateralism between the various States is more appropriate, compared to all those unilateral measures.
I say this both in the aspect of legislating to regulate and promote the development and digital transformation of countries and in the fight against tax fraud, money laundering, terrorism and other crimes.