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To devour this week
🖊️ Editorial
🗣 Our exclusive news
📡 DAC 8 survey
🖼️ NFT Discovery of the month
THE BIG SPLASH
Don't see yourself too good 🙄
Brian Armstrong is not happy 😡.
Engaged in an arm wrestle with the U.S. Securities and Exchange Commission (SEC) over the regulation of cryptos, Coinbase's boss is firing on all cylinders, even if it means using the big guns. Two days ago, the American announced the creation of a trading platform for crypto derivatives outside of ... the United States.
The message is very clear: "Coinbase International Exchange will allow us to continue to serve our customers in the best possible way," explained in particular the man who heads the largest crypto platform 🇺🇸.
In a sign that tensions are not limited to Coinbase, one of the other American heavyweights, Gemini, has also announced the creation of an offshore trading platform for institutions.
Beyond the concomitance of the announcements, it is also the geography of these new structures that is interesting. None of these platforms are in Europe.
Coinbase's is in Bermuda and Gemini's is in Singapore.
In itself, the fact that the two American groups did not choose the Old Continent to set up their new activity is not a tragedy. But it shows that Europe, if it wants to become a real land of welcome for crypto projects, will not have to be satisfied with waiting and seeing itself more beautiful than it is.
It will also have to be proactive and do a little more than a "stable" regulation like MiCA. Because other countries and jurisdictions are also attractive.
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THE BIG NEWS
👉 Capsule Corp Labs (Ternoa) is working on a series A
Wait for the markets to take off again or take advantage of the period to accelerate? This is THE dilemma facing most crypto projects, and while some have decided to stall, others like Capsule Corp Labs seem to have opted for the latter. 👀
According to our information, the French company that originated the Ternoa protocol (developed on Polkadot) has started working on a new fundraising, which would be a series A.
Launched in 2020, Ternoa is a layer 1 blockchain specializing in utility NFTs, particularly used in the gaming industry; Time guardian and Virtual regatta are available on Ternoa. 🎮
Capsule Corp Labs would seek to raise around 15 million euros. About 10 million euros would be in Capsule Corp Labs shares, and 5 million euros in caps, the token of the Ternoa blockchain.
The Series A process is still in its early stages, and given the context (read our survey), the operation could take several months, or even potentially not go through.
Capsule Corp Labs has already raised €7.3 million at the end of 2022 in a first round of financing, which was led by the Omnes Capital fund 🇫🇷, accompanied by two funds specialized in web3, Revam and DFG.
With this new round of funding, Capsule Corp Labs, which has 60 employees, wants to continue hiring and expand abroad, particularly in Asia. The money would also be used to take offices in Paris to accommodate the teams and create a showroom to allow testing the products.
THE BIG REPORT
DAC 8: the EU's lethal weapon for monitoring crypto-taxpayers
By Grégory Raymond (in Paris)
The European Commission is preparing a directive that would prevent crypto holders from circumventing taxation in the 27 member countries.
The European Union continues to carry out its work on crypto. Just a few weeks after the final adoption of the MiCA regulation by the European Parliament, the Commission has just launched work on crypto taxation, and more specifically on how to avoid cryptocurrency-related tax evasion.
It is an open secret that the tax administrations of the 27 member states do not have effective tools to chase those who collect capital gains and "forget" to declare them. 💸
According to the General Directorate of Public Finance, only 20,000 French taxpayers declared earnings in 2022 (for the year 2021). Even if there are no precise official figures, this number is clearly lower than the reality, especially considering the figure on the percentage of French people holding digital assets.
According to the latest KPMG-Adan annual report, published in April, 10% of French people will hold digital assets in 2023; it was 8% in 2022.
"It is difficult to know the number of French (and Europeans, editor's note) who do not declare their income in crypto-currencies, however, by crossing data, we understand that tax evasion related to these assets is still very important," confirms Pierre Morizot, co-founder of Waltio, a tax assistant that helps European taxpayers declare their crypto capital gains.
If for some taxpayers, there is a clear desire to evade taxes, for others it is more the difficulty of the declaration itself that makes them get out of line (our guide to declare everything according to the rules).
Still, the tax authorities don't get it right when they do the math. 🤔
"As states seek to finance the ecological transition and curb the socio-economic impacts of the health crisis, the capital gains made on blockchain are looking like an El Dorado," PwC already indicated in a report on the subject published in 2021.
According to U.S. blockchain data analysis company Chainalysis, the French would have made €3.7 billion in crypto capital gains by 2021.
In theory, this should have brought €1.2 billion into the coffers. Except that the Treasury 🇫🇷 told BFM Business that it only received 400 million euros in capital gains tax on cryptos in 2022 (fiscal year 2021).
Without getting into big calculations, the shortfall is quite obvious.
A proven solution: automatic exchange of information
It is to recover this manna, in France and in the other countries of the European Union, that the Commission has begun work on its DAC 8 directive.
"States have made a lot of efforts in recent years to fight tax evasion," explains Alexandre Lourimi, a tax lawyer for ORWL, a firm specializing in disruptive technology law. "In the cases of financial flows, what has been very effective is the establishment of better administrative cooperation between states, and the cryptos will not cut it," he emphasizes.
The various member states of the European Union will soon be subject to the 8th revision of the Administrative Cooperation Directive (ACD 8). This will mainly concern crypto trading platforms.
"Currently, Exchanges operating on European soil are obliged to report their clients' operations to the tax authorities where they are located," explains Alexandre Lourimi. "This is efficient when the clients are from the same country, but it gets complicated when they are foreign", he adds.
In other words, the French tax authorities are not necessarily aware of the crypto activity of a French tax resident in... Italy. And vice versa.
Except that this reporting will soon be automatically sent to the tax authorities in the client's country of residence. In concrete terms, the French tax authorities will be aware of what taxpayers are doing on the Austrian exchange platform 🇦🇹 Bitpanda without even having to ask.
"The prism of information is very broad, there are obviously the names of customers and their contact details, but also all the transactions carried out in the year, that is, deposits, withdrawals, cryptos to which they have been or are exposed, crypto-crypto exchanges, crypto-fiat exchanges, staking income or even cryptos received as part of airdrop," lists Alexandre Lourimi. 📡
The adoption of DAC 8 is not yet validated, but there is a (very strong) chance that it will pass.
With the current timetable, we can count on an entry into force in 2026. That is, more or less when the MiCA regulation will be fully active.
The tax authorities used to track down inconsistencies
The IRS obviously didn't wait for DAC 8 to take action, but the scheme remains unfocused. The biggest fish usually get caught by sending funds to their bank account from a crypto exchange platform.
The alert is triggered by the banks. When they detect a suspicious movement, they are obliged to inform the intelligence services in charge of the fight against money laundering, terrorist financing and tax fraud. In France, this is TracFin. 👋
Without this, the taxman is moving almost blindly.
But what does "suspect" mean?
If you receive an unusual amount compared to your regular flows (for example 100,000 euros when the largest payments are your salaries), there is a good chance that the tax authorities will ask for information (read our investigation on the techniques used by the tax authorities to detect fraudsters).
"The tax authorities do not currently have the capacity to monitor all movements," notes Alexandre Lourimi. "Many taxpayers, especially those who cash in small or medium capital gains without arousing the vigilance of banks, probably slip through".
With DAC 8, absolutely all flows will be automatically forwarded to the tax authorities of each customer's country of origin, regardless of where in Europe the platform is located 🥸.
The administration will therefore be able to have a much finer view of all the crypto portfolios of taxpayers.
Nevertheless, there remains the case of non-European platforms (even if in theory any platform that has at least one European customer must be registered somewhere in Europe)...
The OECD is preparing a device similar to DAC 8
For platforms operating outside Europe, the Organization for Economic Cooperation and Development (OECD), which brings together 38 countries (including France), is working on a similar system of automatic information exchange.
The name of this system: Crypto Asset Reporting Framework (CARF). It will work on the same principle as DAC 8 (the latter is inspired by it), but with a much wider target.
Since this system requires the signing of a multilateral convention between States, its entry into force could take years. "This type of negotiation is very long", insists Alexandre Lourimi.
In the end, crypto accounts will be subject to the same regime as the traditional financial system, which has been required since 2014 to automatically exchange all customer information with their country of residence.
This is one of the reasons why banking secrecy in Switzerland has come to an end 🇨🇭.
According to the OECD, the information exchanged between States concerned more than 111 million financial accounts involving almost 11,000 billion euros of financial assets during the year 2021.
"The positive side of this is that it will help bring the crypto sector out of hiding, if only from the point of view of banks who are not comfortable with their customers investing in cryptos," believes Alexandre Lourimi. "They will have much less reason to be suspicious when they see a transfer from a cooperating exchange platform," he continues.
Nevertheless, we must ask ourselves the question of privacy in a world where not much escapes the surveillance of states and large companies.
"I remind you that economic exchanges are an integral part of the private life of individuals," warns the lawyer.
THE BIG FOCUS
"Opepen Edition: the NFT collection of the month of May
By Konohime, NFT analyst (in Nantes)
Each month, The Big Whale will analyze a collection of NFTs. For this first one, we chose to look at Jack Butcher's Opepen Edition known as "Visualize Value".
The rest is available on The Big Whale website. 🐳
