Denmark Gains Access to Sensitive User Data on Domestic Cryptocurrency Exchanges for Taxation 🚨 This article is 5 years old...
Denmark Gains Access to Sensitive User Data on Domestic Cryptocurrency Exchanges for Taxation
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Updated: Apr. 9, 2020 at 6:43 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
The battle between tax authorities and cryptocurrency users took a turn in favor of the tax collectors. This month, Denmark’s tax authority won permission to start collecting private user information related to cryptocurrency trading.
Denmark’s tax authority will now have access to sensitive information from three unnamed exchanges dating from 2016 and 2018, including names, addresses associated wallet information, and trading history, according to a recent decision.
Because cryptocurrencies foster anonymity, and because there has been no precedent as to whether exchanges need to supply information on their users in the country, it has been all too easy to hide information from tax authorities.
However, this latest win by the Danish tax authority means the exchanges will need to provide information on names, addresses, and personal tax numbers. The overall intention of this is to “ensure that citizens who have traded cryptocurrencies have paid the right tax,” the agency said according to translations.
Denmark’s decision to allow access to cryptocurrency information is rare, but in the grand scheme of things, it’s probably a good move for the government, considering that regulators tend to take issue with the anonymous and sometimes illicit nature of cryptocurrencies facilitated by privacy coins such as Zcash and Monero—especially in regards to taxation.
This move could further help legitimize cryptocurrencies, especially in terms of helping shed the public perception that Bitcoin—and the technology behind it—is for criminals and die-hard libertarians.
Many other countries are trying to force taxation of cryptocurrencies, but their own legislation is lacking. In many places, laws governing cryptocurrencies are confusing and unclear, and this has led to lawmakers reaching out to tax authorities to set a precedent.
For example, U.S. lawmakers have implored the IRS for clarity on the country’s position on cryptocurrency taxes to ensure the government can get its share.
Tax laws relating to cryptocurrencies across the rest of the globe are also lacking, as legislation takes time to catch up to financial technology. As it stands, it remains all too easy for cryptocurrency users to keep their information private and avoid any taxation, should they decide to do so.
However, the move from Denmark straddles the lines of privacy and fairness, balancing people’s rights to anonymity and at the same time ensuring that everyone pays into supporting the public goods and services provided by the government. Overall, the move sets an important precedent in the race to legitimize cryptocurrencies as a functional, taxable, currency.
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Bitcoin, a decentralized currency that defies the sway of central banks or administrators, transacts electronically, circumventing intermediaries via a peer-to-peer network.
Zcash
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Zcash is a decentralized and open-source cryptocurrency that offers privacy and selective transparency of transactions using advanced cryptography.
Monero
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Monero is an open-source cryptocurrency that focuses on privacy, decentralization, and scalability..
