Tax Agencies Step Up Efforts to Hone in on Crypto Tax Evasion

Publicado en by Cointele | Publicado en

Choosing to divert financial flows offshore is often not illegal at all, but the emphasis that companies such as the now-disgraced Mossack Fonseca place on privacy means that it is difficult for law authorities to bring individuals using such networks for criminal activities, such as money laundering, tax evasion or terrorist financing, to justice.

Although the U.K. has seen numerous financial scandals, its tax agency is looking to minimize the blind spots in the defenses against crime involving cryptocurrency.

The announcement is the latest step on behalf of European lawmakers to break through the anonymous qualities of cryptocurrencies, taking aim at both the biggest coins and privacy tokens, such as Monero, Zcash and Dash.As previously reported by Cointelegraph, although most users of such coins use them for entirely honest purposes, both law authorities and regulators are concerned by the potential for privacy coins to be used for nefarious activities, such as the sale of illicit drugs on the darknet, as well as terrorist financing and money laundering.

The offering of the open contract from the HMRC is a signal that it is committed to effectively ramping up its blockchain forensics capabilities.

Prior to the recent changes in legislation, blockchain analytics companies cooperated with intelligence agencies to link suspicious account activity to the individuals behind them.

Although the powers given to law authorities and compliance organizations under the 5AMLD are likely to radically change the way in which such procedures are carried out, Sanders believes that analytics tools are not a one-time fix for all anonymous crypto activity since: "Blockchain analytics tools do not inherently and directly crack the anonymity," or, more accurately, the pseudonymity, which is an attribute of blockchains.

"The way, in which a blockchain analytics tool can help in linking the pseudonymous blockchain identity to an individual is by tracing cryptocurrency from/to initial/terminal destinations such as exchanges and other services, from which data can then be requested - which will often require a subpoena to be served or, at a minimum, another legally constrained form of data request."

"Blockchain analytics tools are likely to be brought to bear only in cases of existing and substantiated suspicion and are not themselves suited to finding potential tax evaders in the sea of cryptocurrency users. If that's what you want to do, you'll have a better time - as I once semi-seriously advised IRS employees - browsing through Reddit and looking at the chest-beating about tax evasion there."

Regardless of the titans of the tech industry toying with the idea of starting cryptocurrencies of their own, even some of the larger financial companies simply cannot take on the high level of risk associated with crypto at its current stage.

Although any kind of attempt to hinder the supposedly essential core characteristics of cryptocurrency will create intense debate among investors, industry leaders and regulatory bodies, not all people are so fussed about the changes.

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