Coinbase executive warns of „capital flight“ from the U.S. due to crypto currency tax laws

Coinbase executive warns of „capital flight“ from the U.S. due to crypto currency tax laws

Lawrence Zlatkin, Coinbase’s tax director, shared the exchange’s view on taxation and the global cryptomarket during a Unitize panel on July 7. He was joined there by Fidelity’s chief tax advisor, Jessica Reif-Caplan, and Deloitte’s global tax leader, Rob Massey.

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Lack of clarity on cryptomoney taxes
During the discussion, speakers highlighted the lack of clarity surrounding the system of taxation of cryptosystems in the US. According to tax experts from Coinbase and Fidelity, the uncertainty is a result of the complex nature of digital assets, as well as the huge variety of types and characteristics of different currencies.

Staking – the practice of locking crypts to receive rewards – is just one aspect that poses a major challenge from a tax perspective. „There are so many differences between various digital assets, and staking alone is very difficult to understand if you are not so close to cryptoactives,“ Reif-Caplan said.

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Other countries have a more mature vision

Although the Internal Revenue Service (IRS) has been pressuring U.S. citizens for years to include their crypto currencies on tax returns, the authority does not yet provide comprehensive guidelines. Zlatkin said there was a lot of uncertainty surrounding the taxes applied to the practice of staking, but he believed the IRS would likely qualify the rewards as taxable transactions.

Zlatkin said the tax uncertainty in this area is fundamentally causing „an outflow of capital to those jurisdictions that have a more mature view of digital technology and digital assets in general.

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„Staking is a good example,“ Zlatkin said. Thus, Coinbase is also planning to expand its operations beyond the U.S. market.

According to Zlatkin, the company sees international clients as the future because non-U.S. jurisdictions are „more open.

„It’s a growth model for us, right where we operate, to be able to access more clients, to be able to trade with more assets […] Generally speaking, most of the clients in the space would come from major jurisdictions like Canada, the UK, the EU and within Asia.

Coinbase has been paying attention to the development of its overseas markets for some time. In January 2020, the exchange created a second Irish company to extend its cryptomoney custody services to European institutions. Coinbase Custody has been serving European clients in the UK, Switzerland, Germany, Finland and the Netherlands since 2018.