Panel discussion: Regulation & Taxation of Digital Assets — Recap

On March 2nd we co-hosted a panel discussion about the ‘Regulation & Taxation of Digital Assets’ together with the European Blockchain Association.

The setting

First of all, we would like to thank our panelists again for taking the time to participate and for sharing their expert insights with us:

  • Florian Wimmer is CEO and Co-Founder of Blockpit, a company that offers compliance solutions for cryptocurrencies. Blockpit is a technology provider with a platform that facilitates seamless automated tax reporting for digital assets.
  • Werner Hoffmann is CEO and Co-Founder of Pekuna. He studied tax law and computer science before founding Pekuna. Pekuna is a service provider that offers advisory reports, training & online courses as well as memorandums for crypto investors and tax firms.

The main insights

Before diving in, we have to start this section with a disclaimer: this blog post is not financial nor legal advice. Always do your own research and consult your local tax authorities in case you have any specific questions. Given the tremendous growth of the overall digital asset space, investors have many opportunities to put their assets to work. Prior to the event, we collected a bunch of questions from different stakeholders.

Hodling, Staking, and DeFi

In Germany and Austria, the Hodling Herbies among us might be relieved to hear that they can

  • In case you held on to your assets for more than 12 months without putting them to work, you can enjoy the gains in full and do not have to declare them in your tax report (you can, of course, for transparency reasons).
  • However, all panelists advise any kind of trader to carefully document his/her activities. This way, you will be able to prove that you held on to the respective asset long enough to sell it tax-free.
  • Selling the rewards, even with a gain in valuation is most likely not a taxable event, because there was no actual acquisition of those rewards.
  • However, there is no absolute clarity in the regulation yet. For networks with a continuous reward payout, it might be worth considering using an automated solution for the documentation of your activities.
  • If DeFi Daisy provided liquidity for more than one year, swapping the LP tokens back for the tokens she initially provided to the pool as well as any fees she received for the provision of liquidity is likely tax-free, because she has been holding the LP token for over a year.
  • Lending out assets via platforms such as Aave is also most likely not prolonging the holding period from one to ten years.
  • However, these are legal opinions based on proper argumentation — there is no precise court ruling or law in place yet.

General discussion

With the blockchain space innovating at an unprecedented pace, it is no surprise that regulators have a hard time keeping up to speed. While there are still many legal uncertainties, the regulators seem willing and engaged to push this industry forward and establish Europe as a ‘crypto-friendly’, forward-looking jurisdiction. The German government positioned itself as positively minded towards the industry. The blockchain strategy published in 2019 gives reason to assume favorable rules and regulations being passed in the years to come. However, one can also expect a draft about EU-wide regulations regarding crypto exchanges to be released this year. This could mean that exchanges could be required to provide authorities with transactional data of their users without them having to subpoena the exchanges to do so. While regulation might result in an outcry of many ‘cyberpunks’, it could — if done correctly — also mean more consumer protection and lead to more players entering the space. As industry ‘insiders’, it is our job to promote this space and educate lawmakers so that they can draft proper regulation.

Connect & follow

While we definitely did not cover everything that we discussed during the panel in this blog post, we sure hope that it provided you with some interesting takeaways and insights. To get the full experience and extract every tiny bit of information, make sure to join the next event.

The panelists

Florian Wimmer & Blockpit

Werner Hoffmann & Pekuna

Dr. Markus Kaulartz & CMS

European Blockchain Association

About Staking Facilities

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