The Imminent Future of Crypto

The cases of Silicon Valley Bank and Credit Suisse have set off a wake-up call and sounded the alarm on the banking system not only abroad, but also on the old continent, and there is already talk in business circles and in larger industry. publications about a widespread crisis in the banking sector.

By contrast, in the crypto-financial sector, markets have held up remarkably well to the impact of the collapse of some major exchange platforms (from FTX to Italy’s The Rock Trading), and the prices of major assets such as Bitcoin continue to rise. run.

Moreover, a framework of increasingly clear rules is gradually emerging: from the first package of rules on the tax treatment of income from crypto-assets, to the now imminent adoption of MiCA (Markets in Crypto-Assets), the European regulation of the cryptocurrency sector that expected important protection for savers from

Furthermore, these days the approval of a decree-law on tokenization, i.e. on the issue and circulation of shares, bonds, debt securities and other financial instruments through distributed ledger technology.

Is this the first step towards building a large market for alternative, competitive and widely available cryptographic services to conventional banking and finance for individuals and businesses?

What kind of future can we expect to see for cryptocurrencies?

We talked about it with Gianluca Massini Rosati, founder and chairman of Allcore SpA Group, listed on the Italian stock exchange, a leading player in the business and tax consulting sector, which has experienced tremendous growth in recent years.

From the very beginning, Massini Rosati has believed in the potential of decentralized assets and technologies.

It has made it to the point of investing in the creation of a blockchain-based corporate financial services platform and, more recently, an entirely new division, Crypt&Cowhich specializes in crypto-related tax and legal support and advice for non-professionals and others: one of the main missions is to accompany companies in a transition where the use of crypto-assets will become a crucial tool for strategic, financial and tax planning.

Q: In light of the regulations introduced by the Finance Bill 2023, what are the key changes regarding cryptocurrency tax liabilities?

ONE: With Act 197, effective January 1, 2023, the impetus was finally given to fill the long overdue legislative gaps in crypto taxation. First of all, cryptocurrencies were given a classification as virtual assetsit obligation to declare assets held was established, and the “events” that provide rise to taxation instead was defined.

Question: Declaration duty and taxation: let’s clarify these two aspects.

ONE: On the declaratory aspect, all holders of cryptocurrencies or digital assets are now required to fill in the 2023 income form, specifically the so-called RW formthat is, the document dedicated to the monitoring of foreign wealth investments and financial assets.

On the other hand, as far as the tax framework and that RT form is concerned, certain transactions involving the purchase and sale or transfer of cryptocurrencies, defined as cryptoassets by legislation, may result in a tax being payable. The same regulation also states that exchanges between crypto-assets with the same characteristics and functions are not considered a taxable transaction, and are therefore not taxable.

Q: Are there any aspects of particular importance in this new regulatory and fiscal framework for crypto holders?

ONE: The calculation of taxable capital gain is based on the difference between the consideration received and the cost or purchase value. Capital losses, on the other hand, can be taken as a full deduction for amounts over €2,000.

It must be considered that cost or purchase value must be documented with certain and precise elements by the taxpayer. In the absence of these, the cost is zero.

In the case of a purchase by inheritance, the purchase price is equal to that stated for inheritance tax purposes. In contrast, on crypto donation, the purchase cost is assumed to the donor.

Finally, any transfer to other than the intestate owners is considered by the source report, unless the transfer took place by inheritance or gift.

Question: Coming back to the obligations of a user who has held cryptocurrencies for some time, but in previous years has never declared his cryptocurrencies or digital assets, what should he do to regularize his position with the tax authorities?

ONE: To regularize their position, users who have not reported crypto-assets as of December 31, 2021 in their tax return, in the event of no income to declare, i.e. without ever having made any payments, can pay a penalty for non-declaration in the reduced amount of 0.5% for each year of holding of the value of the undisclosed assets.

On the other hand, in the case of income to be declared, i.e. as a result of withdrawals, regularization can be done by paying a replacement tax of 3.5% of the value at the time of realization and a penalty for failure to declare in the reduced amount of 0.5% for each year.

There is an opportunity to be highlighted in this regard: there is a revaluation of the value of crypto-assets held from January 1, 2023 by assuming the value from that date through the payment of a replacement tax of 14%, to be paid in 3 annual installments, with the first installment by 30 June 2023.

However, this possibility must be assessed according to appropriateness with regard to the reassessment itself and based on previous activities. In this case, specific advice on the individual case is required: advice as at Crypt&Co. [cryptandco.com] we provide to our customers.

Question: Recently, Decree-Law No. 25/2023 on the adaptation of national legislation to European standards on the “tokenization” of financial assets was adopted. Is this a step towards a change that will increasingly lead to decentralized finance? On the tax side, what could this mean for investors?

ONE: The ability to turn financial instruments into tokens will allow peer-to-peer trading of instruments such as stocks, bonds and debt securities, taking advantage of blockchain technology and all the decentralization aspects it entails.

One of the most interesting aspects will be the disintermediation of this sector, which, at least in theory, will change hands from financial institutions to technology platforms, effectively changing the face of the financial system we have always known. It can lead to a system that self-regulates and cleanses itself of the excesses we have experienced in the last 20 years, moving us from the debt economy to the value economy.

Certainly for both individuals and companies, it will be interesting to be able to assess various aspects of investment that are dependent on new technologies. In this case, sound tax planning will be a game-changer of a proper investment project and making use of experts in this innovative field will benefit individuals who, even if they intend to approach disintermediated finance, will be able to remain safe in their relationship with the IRS.