Image source: Mikhail Metzel/TASS
As leaders of the top-twenty global economies meet at the G20 summit in Buenos Aires, Argentina, a decision is made to have an international taxation system for the global cryptocurrency market. Over the last year, the International Monetary Fund (IMF) has repeatedly raised the issue of having global cooperation to deal with the evolving FinTech space. Finally, it looks like global leaders have arrived on the same platform!
The G20 Countries have signed a joint declaration in Buenos Aires, where it promises to regulate cryptocurrencies and combat its use for money laundering and the financing of terrorism in line with the Financial Action Task Force (FATF) standards, per a Saudi Gazette report.
Section 25 of the declaration signed by the forum reads: “We will regulate crypto-assets for anti-money laundering and countering the financing of terrorism in line with FATF standards, and we will consider other responses as needed.”
As reported by Japanese publication Jiji.com, the G20 countries will develop the crypto taxation system while considering the crypto market as a huge “IT company”. It means that the taxation system will allow countries to tax all the cross-border payments.
If implemented, it will be really exemplary because according to the existing laws, a government cannot legally tax a foreign company which doesn’t have a physical presence in its territory. However, the Japanese publication notes that there is ample evidence wherein this rule is used to circumvent and avoid taxes.
In a joint declaration, the G20 stated: “We will seek solutions for the international taxation issue accompanying the digitization of the economy and will continue to collaborate”.
In addition to establishing a cross-border crypto tax system, the G20 leaders will also work towards introducing necessary measures to see that multinational corporations don’t succeed in tax avoidance.
During the 2019 G20 summit scheduled in Osaka, Japan, the member countries will submit a report on the crypto taxation system. Upon proper reviewing by all nations, it is likely to be finalized by 2020. Apart from the plans of establishing a taxation system, the G20 will also develop a framework to handle illicit activities of money laundering involving digital currencies.
The Japanese publication notes that while the EU and UK are positive over introducing global taxation rules, China and the U.S. stand skeptical on developing such taxation system for the crypto market.
IMF Raising the Issue of Global Regulation and Cooperation
With the rapidly evolving FinTech space, IMF chief Christine Lagarde has remained open to the ideas of digital currencies, especially the underpinning blockchain technology which facilitates instant and low-cost global transactions.
Earlier in January 2018 at the World Economic Forum, the IMF chief presented a report providing insights into the digital currency market. An excerpt from the report read: “virtual currencies and their underlying technologies can provide faster and cheaper financial services and can become a powerful tool for deepening financial inclusion in the developing world.”
However, in the report, Lagarde also mentioned that global cooperation is required to weed-out bad actors from the crypto economy and protect investors’ interests.
Three weeks back while speaking at the FinTech conference in Singapore, Lagarde stressed the idea that central banks of the respective countries should consider having a Central-bank-issued-digital-currency (CBDC).
Lagarde said: "I believe we should consider the possibility to issue digital currency. There may be a role for the state to supply money to the digital economy.”
She further added: “Various central banks around the world are seriously considering these ideas. While the case for digital currency is not universal, we should investigate it further, seriously, carefully, and creatively.”