Coinbase, the largest cryptology exchange in the United States, believes that other countries are much more open than America in terms of regulation and taxes on cryptology .
Lawrence Zlatkin, director of tax at Coinbase, shared the exchange’s perspectives on taxation and the global cryptocurrency market at a Unitize panel on July 7, along with Jessica Reif-Caplan, senior tax adviser at Fidelity, and Rob Massey, global head of tax at Deloitte.
Lack of clarity in cryptotax
During the discussion, speakers pointed out the lack of clarity regarding the taxation of cryptographic currencies in the United States. According to tax experts from Coinbase and Fidelity, this uncertainty is due to the complex nature of digital assets and the wide variety of types and characteristics of different coins.
Staking – the practice of locking cryptography to receive rewards – is just one aspect that poses a great challenge from a tax perspective. “There are so many differences between different digital assets, and just staking them is such a complicated thing to understand if you’re not so close to digital assets,” Reif-Caplan noted.
Non-American countries have a more mature view
While the Internal Revenue Service (IRS) has for years been urging US citizens to include cryptography in their tax returns, the authority has yet to provide comprehensive guidance. Zlatkin said there is a lot of uncertainty about the taxation of staking, but he believes the IRS is likely to label staking awards as taxable transactions.
Zlatkin said that the fiscal uncertainty of cryptography in the US is essentially causing an “outflow of capital to jurisdictions that have a more mature view of digital technology and digital assets in general”
“Staking is a good example,” Zlatkin noted. For example, Coinbase itself, the largest encryption exchange in the United States, plans to expand its operations beyond the U.S. market.
According to Zlatkin, Coinbase sees international clients as the future, as non-US jurisdictions are “more open-minded”.
“It’s a growth model for us where we operate, having access to more clients, being able to trade more assets…Generally speaking, most clients in the space in particular would be from large jurisdictions such as Canada, the UK, the EU and Asia
Coinbase has been attentive to the development of its foreign markets for some time. In January 2020, the exchange set up a second Irish company to extend its encryption services to the European institutions. Since 2018, Coinbase Custody has been serving European customers in the UK, Switzerland, Germany, Finland and the Netherlands.