Andrey Elinson: The tax issue will hinder the development of international cryptocurrencies

And although a growing number of countries have tax policies that cover use of cryptocurrency or digital tokens as payment, the majority are still developing




tax on crypto


Why cryptocurrency cannot fully replace fiat money in international business transactions

Cryptotrader Andrey Elinson believes that, because of the lack of control systems, governments will slow the development of cryptocurrencies as a means of payment for international transactions, fearing that companies might use them for tax evasion and law circumvention, but in the future the situation will change.

Andrey Elinson emphasizes that despite it being the most difficult year for the cryptocurrency market, investment and user interest still remained in 2022. According to CoinGecko, the number of bitcoin and etherium addresses (those being two of the most popular currencies) worth up to the equivalent of $1,000 increased by nearly a third last year. The number of wallets with large sums continued to grow as well. The major cryptocurrency markets themselves have begun to recover since the beginning of 2023, albeit with fluctuations. "On the one hand, market participants are accumulating investments, on the other hand, more and more new players who believe in cryptocurrency are also coming into the sector," says Andrey Elinson. "Despite the crises, the audience of digital currency users is growing, as is the level of public competence".

Cryptocurrencies are continuing to replace fiat money, and eventually this type of transaction will become as commonplace for both individuals and many companies as wire transfers, Elinson adds. As estimated by the Singapore-based specialized company Chainalysis, the global volume of transactions in major cryptocurrencies grew to $16 trillion in 2021. By comparison, the entire volume of world trade in the same year reached $28.5 trillion.

Their popularity has grown against the backdrop of the pandemic and continues to grow amid worsening geopolitical conflicts around the world. And starting with Australia's Red Belly Blockchain, it immediately became clear that blockchain projects can easily handle cross-border transaction flows.

Nonetheless, large businesses, both government-adjacent and private, which draw a lot of attention from regulators, will remain cautious about the use of cryptocurrencies in their business settlements for a long time still. "The reason is, first of all, the lack international laws applicable to both these currencies and all others," states Andrey Elinson.

And the attention is not always positive. As recent example, Senator Sherrod Brown, after a series of scandals around FTX, criticized crypto assets, calling them nothing more than speculative products, and called for strict regulations of the industry. On the other hand, in January of this year, the U.S. House of Representatives announced plans to develop rules for federal regulators on cryptocurrencies and a policy framework for digital financial technology.

"This is not an easy task, because the very decentralized nature of cryptocurrencies does not leave room for state regulation,

unified standards, or rules," notes Andrey Elinson. "Therefore, there will definitely be no quick solution, given that crypto is mostly legally interpreted as property, not as a means of payment. And the tools for managing currencies and the stock market that were developed with fiat money in mind are not suitable for regulating cryptocurrencies.

"So fiat currencies are definitely not going anywhere for the foreseeable future," the expert adds.

The key reason is that different countries see cryptocurrencies as a risk to their monetary sovereignty. "And in the current relationship paradigm, this is an unthinkable step for the authorities," Elinson notes.

If crypto is recognized as a means of settlement at the cost of complete de-anonymization and state control over crypto wallets, the advantages that attract most users to blockchain platforms, i.e., freedom of settlement and relative anonymity, will be lost.

The decentralized principle questions the attribution of financial assets to a jurisdiction of any country, Andrey Elinson believes. This would complicate accounting for assets and financial flows for tax purposes, and as taxes are the life blood of any country, the finance ministries would not allow this.

Another risk is related to proof of payment, given that here, too, the system of legal relations has not yet been formed.

In addition, the number of cyber threats is growing, which also reduces the trust that large corporations and governments might place in the reliability of digital currencies

"But against the growing impact of cryptocurrencies on the financial sphere and on economic processes, central banks are actively looking for management mechanisms and are even trying to seize the day, so to speak, by developing their own digital currencies (CBDC)," Andrey Elinson continues. There are about a hundred central banks doing this. With CBDC, the central bank can become the sole manager of payment and even credit and depository operations. But CBDCs, though based on the blockchain technology, will be centrally managed, and their volume can be infinitely replenished, similar to fiat money and quite unlike cryptocurrencies.

As Andrey Elinson stresses, CBDC is now a more convenient alternative to cryptocurrencies. This is what central banks will be betting on, including recommending CBDC for international transactions. A number of countries are already developing CBDC infrastructure outside their jurisdictions to make cross-border transactions faster and easier. One such pilot is Dunbar, created by a coalition of Singapore, Malaysia, Australia and South Africa under the auspices of the Bank for International Settlements. A similar project is being tested by France and Tunisia.

Nevertheless, cryptocurrencies have significant potential to supplant the unsustainable currencies of many countries. According to some estimates, we may be talking about half the states in the world, adds Andrey Elinson. For example, El Salvador was the first country in the world to legalize bitcoin as a national means of payment.

We have to consider that young investors favor crypto, and for them, the inexorable and cardinal digital transformation of the world economy is more of a norm than a challenge. "So now we have to find the formula for balancing the existing risks and the opportunities offered by the decentralized blockchain technology," Andrey Elinson concludes.




Other Pages you may like:


Casino & Sports Links on Feedinco

Latest Betting Tips

Guillermo Brown vs Patronato Tips

Argentina - Primera Nacional

Today - 18:00

Chicago Fire vs Columbus Crew Tips

USA - MLS

Tomorrow - 00:30

Ituano vs Atletico GO Tips

Brazil - Serie B

Today - 20:00

Cerezo Osaka vs Vissel Kobe Tips

Japan - J1 League

Today - 10:00

Botafogo RJ vs Fortaleza Tips

Brazil - Serie A

Tomorrow - 00:00

Rostocker FC vs Neustrelitz Tips

Germany - Oberliga NOFV-Nord

Today - 12:00

Germany vs Ukraine Tips

World - Friendly International

Jun 12 - 16:00

Novorizontino vs Sampaio Correa Tips

Brazil - Serie B

Today - 20:00

Yokohama F. Marinos vs Kashiwa Reysol Tips

Japan - J1 League

Today - 07:00

Hartford Athletic vs Detroit Tips

USA - USL Championship

Jun 13 - 23:00