BLOCKCHAIN, CRYPTOCURRENCIES AND NFT

BLOCKCHAIN, CRYPTOCURRENCIES AND NFT

In the previous article, https://bit.ly/3zJru3Z, we reported our thoughts regarding the possible impact of new technologies on the world of the liberal professions and, in particular, on the figure of the Chartered Accountant

Here, however, it is considered necessary to take a step back in order to summarily explain what are the main characteristics of the new technologies on the market, consequently conditioning work, investment, and the exchange of goods, services and activities. 


BLOCKCHAIN

The terminology "Blockchain" stands for a technology that makes it possible to manage and update data and information present in a computer network in a secure way, since the information is written, read and modified exclusively on the "nodes" present on the network itself, without, however, there being a central control unit: consequently, this tool can be used to manage, for example, documents, certifying the transaction and the exchange that has taken place between two or more economic entities. 

The areas of application can be multiple and transversal, however, the technology lends itself well to the world of decentralized transactions and operations, as data can be transferred at zero cost, 24 hours a day, without the need for a central control entity, such as a banking or financial institution: in this way, once the consent and approval of the transaction has taken place, the system certifies the exchange of currency, tracking its every movement within the Blockchain itself. 


CRIPTOVALUTE

It is no coincidence that the use of the Blockchain came powerfully into the daily consideration of the broad masses when the first denationalized currency, namely ₿ Bitcoin, was launched in 2009. 

Bitcoin is a cryptocurrency and an international payment system created by an anonymous inventor: unlike classic currencies, which are physicalized into bills and coins, cryptocurrencies are exclusively digital currencies that operate through cryptographic procedures. From year to year, the market for cryptoassets has increased exponentially, both in terms of the increase in value, the spread and creation of cryptocurrency categories, and the growth and development of related transactions on payment systems and the financial markets themselves: they are particularly suitable, due to their nature, for short-term speculative investments, as their performance is highly fluctuating and sometimes inflated, and they are also easily purchased by less experienced economic actors. 


OPERATIONAL CONSIDERATIONS

While the technological progress represented by the aforementioned instruments is undeniable, as is the development of the areas of present and future application, it must be stated that the increasing prevalence in various financial and economic sectors is accompanied by an absence of fiscalregulationlegal uncertainty and lack of supervision.

Consider, for example, the growing use of cryptocurrency payments: the rapid spread entails a need to better regulate millions of private transactions that take place on a daily basis, in order to avoid malfeasance and evasive actions

Considering the professional sphere of the Certified Public Accountant, it should be noted that the Court of Cassation, in its ruling No. 2868, filed last January 2022, affirmed that the crime of self-money laundering can also be associated with an "indirect" purchase of Bitcoin or cryptocurrencies in general: this undeniably entails an operational difficulty, for example related to the obligations related to anti-money laundering regulations that the professional is required to fulfill towards his or her assisted clients. 

At the European level, a regulation called MICA, "Markets in Crypto Assets," is being developed, which aims to regulate the holding of cryptocurrencies within a legal framework in order to promote information transparency related to the issuance and admission of trading, support fair competition also to make the market develop while maintaining greater financial stability

Also the OECD in March 2022 devised a new framework related to cryptocurrencies, in order to consider greater tax transparencyreporting and information exchange requirements on transactions made through virtual currencies, as well as due-diligence procedures to be submitted.

Coming to the Italian situation, the Agenzia delle Entrate has first taken an interpretative path by equating cryptocurrencies with foreign currencies, with the obligation to indicate cryptocurrencies held in the RW panel of the income tax return: this decision appears not to be entirely fitting with the definition of virtual currencies, as they do not have legal tender and physical manifestation and consequently cannot be substantially approached to the concept of currency; a possible alternative considered valid is certainly to compare cryptocurrencies to the holding of intangible assets or financial instruments: this would also imply the imposition of VAT and would make it possible to overcome the current taxation associated with cryptocurrency transferred or converted into legal tender or other cryptocurrency, which is derived from withdrawals from electronic wallets, wallets, which register an average deposit exceeding a countervalue of € 51. 645.69, for at least 7 continuous business days in the tax period under consideration. 

Instead, the examination of NFTs is more complicated because depending on the token of reference the tax treatment changes, for this reason it is first of all appropriate to refer to the existing relationship between seller and buyer or user: for example, the sale of a work of art NFT is comparable to the sale of a physical work of art, for this reason as in ordinary practice it will be necessary to understand whether there is the requirement of professionalism on the part of the author, application of VAT and subsistence or not of copyright. 


CONCLUSIONS

Regarding what has been said so far, we want to emphasize how technological transformations are progressively changing some aspects of the financial and economic world, however, it is necessary, also in order to achieve a further evolution and expansion of the market and of the use of these assets that there be a strong regulatory intervention, as the current scenario is incomplete and can lead to serious problems for both freelancers, entrepreneurship and individuals: in the Senate last March a bill was presented on the subject of taxation of virtual currencies, waiting to see what developments there will be.

 

Edited by: Luigi Alfredo Carunchio, Chartered Accountant and Statutory Auditor

You can download the article in PDF here

For more information:

luigicarunchio@valoreassociati.it

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