The Crypto world: opportunity or risk

In the absence of legislation that is in step with the times and with economic and market needs, let's try to briefly summarize what is necessary to know before approaching what the future trading system will be.

The progenitor of all cryptocurrencies is the well-known Bitcoin which pioneered the virtual world of electronic currencies. All governments in the world are studying legislative solutions to regulate the phenomenon of growth in the financial use of cryptocurrencies. The generation of surplus value linked to sales activity is under the scrutiny of the tax authorities.

Italy does not yet have ad hoc legislation that regulates this aspect from a financial and fiscal point of view but this does not mean that there are no rules. Following many requests, the Revenue Agency and some rulings (which, please note, are not binding but provide an idea of the thinking of the Italian tax authorities) have established that the capital gains realized must be indicated in the tax return.

Cryptocurrencies are not legal tender andwallets(virtual payment instruments) are not current accounts. However, it is necessary to clarify the nature of electronic currencies which are different in nature, such as non-fungible ones (so-called NFTs which only give rights to use services) and fungible ones (for example Bitcoins, considered real currencies for the purchase of goods and services). Others, however, can be compared to real financial instruments, such as shares or bonds.

As stated above, according to the current orientation on fungible cryptocurrencies (with the exception, therefore, of NFTs on the taxation of which the Revenue Agency has not yet expressed its opinion), the Italian taxpayer will be required to include them in his tax return and, in some cases, to pay the related taxes.

The taxpayer natural person resident in Italy, every year, must:

1) Insert in the tax return, in the RW section (Foreign investments and/or foreign financial activities), the value of all cryptocurrencies held during the year. Failure to declare leads to the application of sanctions;

2) Check whether the total of sums held, on all cryptocurrency wallets and all current accounts in fiat currency (dollars, yen, etc.) exceeds, in euros, the limit of 51,645.69 for at least seven consecutive working days in the calendar year, according to the exchange rates of January 1st. It is advisable to also consider public holidays when calculating the limit as the cryptocurrency market is always open;

3)  in the event that the threshold referred to in point 2) has been exceeded even just once during the year any capital gain generated by the transfer of digital currency will generate a tax rate of 26%. By transfer we mean both the sale and use of the cryptocurrency for the purchase of goods and services or the exchange of cryptocurrency with another cryptocurrency.

Ultimately, it can be said that matter is complex. It is therefore appropriate and desirable to have a regulatory intervention that clarifies many obscure sides of the process which make compliance difficult with difficulty in findingire exchange rates or transactions that are difficult to recover, with complex calculations to consider. In the event of a possible assessment by the Revenue Agency, the burden of proof of having correctly declared and paid taxes on cryptocurrencies is borne by the taxpayer.

The risk is of incurring administrative sanctions (which can reach 240% of the tax that would have been due, in addition to the payment of the capital gain realized) and penalties (for example, in the case of failure to declare, you risk up to 5 years of imprisonment in the case of evaded tax exceeding 50,000.00 euros).

In conclusion, anyone who wants to approach this world, which will also be the not too distant future, will have to deal with legislation that is not in step with the times and which risks hindering a path that has now started and continues its unstoppable journey.