The European Parliament (2019–2024) Draft Report started by declaring that EU finances are in a critical stage wherein the future of EU policies and the confidence of Europeans and investors in the Union will be severely harmed by a lack of change.
In other words, the European Union’s yearly budget, estimated to be 170 billion euros ($185 billion), could be financed by new taxes on cryptocurrency holdings and other assets.
Lawmakers propose the implementation of a European tax on digital assets, the proceeds of which would be added as a new own resource to the European budget; they emphasised that the global crypto market, since the 2008 financial crisis, has been expanding quickly (but unsteadily), with a capitalisation of up to EUR 2 trillion in May 2021.
The good part is that given their high mobility and cross-border component, The European Parliament Draft Report considered crypto assets increasingly being seen as legitimate means of payment and a component of investment strategies. In this regard, it is stressed that a European tax on crypto assets would promote the emergence of a harmonised tax framework for crypto assets and be more consistent with the cross-border nature of the crypto asset.
The European Parliament also focuses on the fact that there are many possible taxation options for crypto assets, including a tax on capital gains from crypto asset activities (based on a uniform levy rate for all EU Member States), a tax on crypto asset transactions, or a tax on mining and trading crypto assets determined according to their electricity consumption and environmental impact; calls on the Commission to assess the impact of these options on the European crypto asset market, to estimate the impact of each option.
The European Commission proposed new guidelines in December last year to allow tax authorities to share information about a crypto investor’s holdings. However, national governments still have the final say on what and how much to tax.
The report can be amended by committee members until February 2nd. In actuality, the 705 members of the parliament have little influence over tax rules because they are typically adopted unanimously by the 27 national finance ministers of the Union.
EU Legislators Place New Requirements on Banks’ Holding Cryptocurrencies
The Economic and Monetary Affairs Committee of the European Parliament voted to put stringent regulations on banks wishing to hold cryptocurrency.
According to Reuters, an amendment to a measure governing financial capital requirements for traditional institutions was sneaked in before the vote and suggested that banks apply a risk-weighting of 1,250% to exposures to crypto-assets.
This means that banks will need to be able to cover a shortfall with capital reserves and not be able to develop leverage when the laws take effect. The Basel Committee on Banking Supervision, which establishes global banking regulations, advocated the % as the highest level of securitisation. Basel III changes.
The new proposal further specifies that the European Commission should examine whether a dedicated prudential approach for crypto assets would be necessary and propose, if suitable, a legislative proposal for this purpose.
~ By Jordano M. Z. ~