Cryptocurrency and Tax Evasion: Unraveling the Digital Knot for Global Governance

Suet Yi Yan ()
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Suet Yi Yan: University of Leeds

A chapter in Proceedings of the 2024 2nd International Conference on Management Innovation and Economy Development (MIED 2024), 2024, pp 384-396 from Springer

Abstract: Abstract In the digital age, the advent of cryptocurrencies such as Bitcoin and Ethereum was not just anticipated but has rapidly become a mainstay, heralding a paradigm shift in the financial ecosystem. However, their ascent has challenges for tax regulation and enforcement. This paper delves into the research background by highlighting the intrinsic properties of cryptocurrencies—namely, their anonymity, decentralization, and the absence of centralized reporting mechanisms—that complicate tax governance on an international scale. It articulates the thematic focus on the jurisdictional complexities and the pursuit of regulatory consensus through meticulously examining existing legal frameworks and illustrative case studies of cryptocurrency-related tax evasion. Methodologically, the study adopts a qualitative analytical approach to dissect the specific challenges digital currencies introduce to tax governance. It meticulously investigates the strategies leveraged to exploit these unique features for tax evasion and critically evaluates the capacity of existing legal frameworks, including the Fifth Anti-Money Laundering Directive and the Financial Action Task Force’s Travel Rule, to surmount these hurdles. The key findings illuminate the dichotomy presented by digital currencies. While they forge innovative financial pathways, they concurrently pave the way for novel forms of tax evasion and money laundering, exacerbating the complexity due to a disjointed international regulatory landscape. Conclusively, this research advocates for implementing incentive-based reporting mechanisms and embracing cutting-edge technological solutions to bolster transparency and compliance. It emphasizes the overarching conclusion that international collaboration is paramount in crafting a standardized and harmonized global governance framework for digital currencies. The perpetually evolving nature of digital currencies demands unwavering vigilance, innovative thought, and cooperative engagement from all stakeholders involved, highlighting the importance of adaptability and unity in addressing the challenges and opportunities they present.

Keywords: Cryptocurrency; Tax Evasion; International Regulation (search for similar items in EconPapers)
Date: 2024
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DOI: 10.2991/978-94-6463-542-3_45

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