Crypto Winter In Spain? New Taxes Target Digital Assets

In a move that could have ripple effects across Europe, Spain is tightening its grip on crypto monitoring and seizing digital assets for tax debts. The Ministry of Finance, led by María Jesús Montero, is spearheading legislative reforms to grant the Spanish Tax Agency enhanced powers to identify and seize crypto holdings from taxpayers with outstanding debts.

This follows a February 1st decree expanding the entities obligated to report tax information to the Treasury, encompassing banks, savings banks, and even electronic money institutions.

The measures come amidst Spain’s proactive approach to regulating the digital asset landscape ahead of the European Union’s Markets in Crypto-Assets Regulation (MiCA) framework, set for full implementation in December 2025.

Key Provisions Of The Crackdown

The proposed crackdown on cryptocurrency in Spain includes several key provisions aimed at strengthening the government’s ability to regulate and collect taxes in the digital asset space.

One major aspect of the legislative changes is the expansion of the Tax Agency’s authority, granting it the power to directly identify and seize assets associated with taxpayers having overdue debts.

Additionally, the February 1st decree widens the scope of entities obligated to report tax-related data to the Treasury. This now includes not only banks, savings banks, and credit cooperatives but also electronic money institutions. This expanded list potentially provides a broader framework for tracking digital currency transactions.

Spanish residents holding crypto assets on foreign platforms are subject to a mandatory declaration to the tax authorities by the end of March 2024. Initiated on January 1st, 2024, this declaration period requires individuals and corporations to disclose the value of their crypto holdings abroad as of December 31st, 2023.

While all Spanish residents with foreign crypto holdings are required to make a declaration, only those exceeding €50,000 (approximately $54,000) are obliged to declare them for wealth tax purposes.

Individuals holding their crypto in self-custodied wallets, outside of exchange platforms, must report them through the standard wealth tax form. These measures collectively aim to establish a more robust regulatory framework for cryptocurrency transactions and holdings in Spain.

Spain At The Forefront Of Crypto Regulation

Spain’s proactive stance on crypto regulation positions the country as a frontrunner within the European Union. Notably, the country is implementing its own crypto regulatory framework ahead of the EU-wide MiCA framework coming into effect in late 2025. This preemptive approach underscores Spain’s commitment to establishing clear regulations within the crypto space.

Furthermore, Spanish tax authorities issued over 325,000 warnings in 2023 to residents who failed to declare their crypto holdings, marking a significant increase from the 150,000 warnings issued in 2022. This highlights the government’s growing focus on ensuring compliance within the crypto tax landscape.

Challenges And Considerations

While Spain’s efforts to regulate and tax cryptocurrencies are notable, some potential challenges remain. The rapid implementation of these changes might pose regulatory hurdles, requiring careful calibration to ensure effectiveness and minimize unintended consequences.

Additionally, accurately tracking and seizing self-custodied crypto assets, held outside of exchange platforms, could prove difficult due to the inherent anonymity associated with such wallets.

Global Implications

Spain’s move could serve as a precedent for other countries seeking to establish frameworks for monitoring and taxing cryptocurrencies. As the global crypto market continues to evolve, Spain’s proactive approach offers valuable insights for policymakers worldwide navigating the complexities of regulating this dynamic asset class.

Featured image from Pixabay, chart from TradingView

The Crypto Bulls Are Back: Digital Asset Inflows Cross $103 Million In One Week

Inflows into crypto investment funds have resumed after a brief hiatus two weeks ago, as evidenced by CoinShares’s latest analysis. According to James Butterfill, Head of Research at CoinShares, digital assets saw a net inflow of $103 million last week, as the wider crypto industry went through a few days of bullish sentiment. This is particularly exciting, as it signaled a change from the net outflows in digital asset investment funds witnessed two weeks ago. 

Crypto Fund Inflows Surge To $103 Million

Crypto asset investment funds witnessed a minor net outflow of $16 million two weeks ago, bringing an end to 11 consecutive weeks of inflows since September. However, according to a social media post by Butterfill, these investment funds attracted a $103 million net inflow last week. As expected, Bitcoin, again, led the charge, attracting 85% of the total inflow. Bitcoin saw an inflow of $87 million last week, bringing its total net inflow this year to $1.758 billion. 

Ethereum led the altcoin market with a net inflow of $7.9 million, bringing its total net inflow this year to $23 million. Solana followed suit with a $6 million net inflow. At the time of writing, Solana’s total inflow this year stands at $162 million, reflecting the better sentiment Solana has seen with institutional investors this year. 

On the other hand, Litecoin and Avalanche investment products were the only ones registering a net outflow during the week, with $0.4 million and $2.6 million respectively.

In terms of geographical location, Germany had the most inflows with $41.6 million, Canada with $25.8 million, USA with $20.4 million, and Switzerland with $15 million. On the other hand, Sweden had a net outflow of $8.7 million. 

Total assets under management now stand at $52 billion, representing 31% of the entire crypto market cap of $1.65 trillion. Most of this is traded in the United States, with US-based investment funds holding $37.8 billion worth of assets under management.

Crypto total market cap chart from Tradingview.com

State Of The Market

Investment in digital asset funds is largely tied to the sentiment among the spot market prices. As a result, the net inflows last week were a mirror of the price surge led by Bitcoin, with the crypto crossing over $44,000 multiple times during the week. Bitcoin has since corrected and is now trading at $42,390.

Ethereum’s lead in the altcoin market has been overshadowed by Solana since October. The crypto is up by 53% in a 7-day timeframe, hitting a yearly high of $124.92 on Christmas day. At the time of writing, Solana is trading at $114.  

Digital Assets On The Rise: 4th Consecutive Week Nets $66 Million

The digital assets markets experienced a consecutive fourth week of inflows from institutional investors. CoinShares data shows that a portion of the momentum observed can be attributed to an increasing expectation for the authorization of a spot Bitcoin Exchange-Traded Fund (ETF) in the United States.

The aggregate value of assets under management (AuM) has experienced a notable surge, reaching $33 billion, denoting a 15% growth rate since the beginning of September. Nevertheless, investors are displaying a greater degree of prudence compared to their response to Blackrock’s announcement in June.

The latest influx of funds, although possibly associated with the prospective introduction of a spot bitcoin ETF in the US, is very modest in comparison to the inflows witnessed in June.

Bitcoin Leads Digital Assets: $315 Million Inflows This Year

According to the report, a significant portion of the inflows seen in the previous week amounted to $55.3 million, representing 84% of the total. This influx was specifically directed towards investment products related to Bitcoin. As a result, the cumulative inflows for Bitcoin products during the current year have reached a total of $315 million.

Solana experienced an additional infusion of $15.5 million during the previous week, resulting in a cumulative inflow of $74 million for the year. This notable performance positions Solana as the leading alternative cryptocurrency thus far in the current year.

On the other hand, and amidst persisting concerns, Ethereum faced a challenging week as it observed a significant outflow of $7.4 million. Notably, Ethereum was the only altcoin to encounter a decline in its financial performance during this period.

Other altcoins such as Cardano (ADA) and Binance Coin (BNB) saw small inflows of $0.1 million and $0.2 million, respectively.

James Butterfill, the Head of Research at CoinShares, pointed out that the inflows observed in the previous week have not yet achieved the same magnitude as those witnessed earlier this year when BlackRock initially submitted an application for a Bitcoin ETF.

Butterfill said:

“While the most recent inflows are likely linked to excitement over a spot Bitcoin ETF launch in the U.S., they are relatively low in comparison to the initial inflows following BlackRock’s announcement in June.”

Navigating The Digital Asset Landscape: Trends And Caution

Digital assets are becoming more and more popular, and many people are investing in them. However, some investors are being careful about these assets, and we don’t know if they will keep being cautious. We have to wait and see if the market will change and bring new trends or chances for investors in the next few weeks.

The world of digital assets is rapidly growing, with more and more people putting their money into cryptocurrencies and other digital investments. Despite this, some investors are still being careful and not rushing into things.

We can’t predict whether this cautious approach will continue or if the market will surprise us with new trends and opportunities in the weeks ahead. It’s an exciting time in the world of finance, and we’ll have to keep a close eye on how things develop.

(This site’s content should not be construed as investment advice. Investing involves risk. When you invest, your capital is subject to risk).

Featured image from Ledger Insights

Crypto Era Looms: BIS Innovations Chief Calls On Central Banks To Prepare

Central banks worldwide must be proactive in adapting to the fast-evolving crypto landscape, urged Cecilia Skingsley, the head of the Innovation Hub at the Bank for International Settlements (BIS). 

Speaking at the New York Fed Conference on Fintech: Artificial Intelligence and Digital Assets in Manhattan, Skingsley emphasized the need for central banks to embrace technological advancements, including cryptocurrencies and tokenization.

Skingsley highlighted the distinctive approach of the BIS Innovation Hub, which focuses on researching and investigating the impact of new technologies on central bank operations.

Unlike other institutions, the Innovation Hub actively engages with emerging technologies, including cryptocurrencies, and shares its findings with the global community. Skingsley expressed pride in the Innovation Hub’s project portfolio, which sets it apart from similar initiatives.

In their most recent report titled “BIS Blueprint for the Future Monetary System,” BIS researchers underscored the significant potential of tokenization in enhancing efficiency and transparency within financial markets. However, the report also questioned the current value proposition of cryptocurrencies themselves.

Tokenization’s Promise And Crypto’s Limitations

The report acknowledged that cryptocurrencies and decentralized finance (DeFi) have provided a glimpse into the potential of tokenization. Still, it criticized cryptocurrencies as a flawed system that cannot assume the role of the future of money. Despite these reservations, Skingsley stressed the importance of central banks preparing for a tokenized future.

“If the future is tokenized, if we’re going for a future where we will have tokenized assets on a broad scale, what would that mean for central banks?” Skingsley pondered. “What sort of infrastructure do you have to have?”

SEC’s Role In Crypto Regulation

In a related development, Paradigm, a prominent crypto investment firm, raised concerns about the US Securities and Exchange Commission’s approach to crypto regulation. Paradigm voiced its worries in an amicus brief filed in the SEC’s lawsuit against Binance, a major cryptocurrency exchange.

Paradigm’s brief highlighted the potential consequences of the SEC’s strict stance on crypto, warning that it could spill over into other asset markets beyond the SEC’s purview. The firm argued that the SEC’s interpretation of the securities laws could hinder the development of crypto technology in the United States and disrupt other significant markets.

“Here, and in other cases, the SEC has acted in excess of its statutory authority,” Paradigm stated in its brief, emphasizing the importance of correct interpretation of the Securities Laws.

As the financial world continues to grapple with the transformative impact of digital assets and tokenization, the calls for central banks to stay vigilant and adapt to this rapidly changing landscape grow louder. Skingsley’s message is clear: readiness is key in navigating the terrain of the digital future.

Featured image from iStock

Crypto Payments Gain Ground In Canada As Confidence Grows

A recent study by the Bank of Canada (BoC) revealed that crypto ownership in the country had slowed over the past two years. However, recent sentiment from Coinbase’s Country Director for Canada, Lucas Matheson, suggests Canadians are slowly warming up to crypto again. 

Canadians Adopting Crypto Payments

In a conversation with Cointelegraph, Matheson mentioned that Canadians’ outlook towards digital assets is changing as they adopt it to make daily transactions. This means that crypto in the country is garnering mass adoption as service providers and consumers are using it to facilitate payment of goods and services. 

Furthermore, Matheson believes that more daily use cases will arise that will be “digital asset-backed.” This belief could stem from the fact that the tokenized industry is rapidly growing with many real-world assets (RWA) being brought on-chain.  Many industries are expected to be disrupted with the help of blockchain technology and non-fungible tokens (NFTs).

The E-commerce industry is one that Matheson has singled out to be significantly impacted by NFTs. He said the major use case would be “phygital” items, where fashion brands create the tokenized version of their physical products. Popular brands like Nike and Lacoste are known to have ventured into the metaverse with the introduction of their tokenized wear. 

Coinbase And Key Regulations Integral

Matheson emphasized the importance of regulatory certainty and how Coinbase is contributing to the crypto industry’s growth in Canada. According to him, the crypto exchange was working closely with the Canadian authorities to build trust and help them understand the role of digital assets in building a sustainable economy.

Coinbase officially launched in the Canadian market on August 14. The company announced that it had partnered with local banks and payment platforms to ensure easy fiat on-ramp and make crypto more accessible to Canadians. Furthermore, Coinbase rolled out its Interac payment rails to enable local users “seamlessly deposit and withdraw funds (CAD) to and from their Coinbase wallets…”

Meanwhile, Canada’s lawmakers have shown commitment to backing the crypto industry in the country by providing regulatory certainty to stakeholders in the industry. In June, the Canadian House of Commons Parliamentary Standing Committee on Industry and Technology published a report highlighting the positive impacts blockchain technology could have on the economy and the need to provide regulatory clarity and protect the interests of consumers. 

The report also proposed an innovative regulatory approach for cryptocurrencies, emphasizing how Canada could become a leader in the crypto economy. 

With such efforts from Coinbase accompanied by regulatory certainty, Crypto adoption is bound to grow. Interestingly, the Ontario Securities Commission (OSC) claims that over 30% of Canadians plan to buy crypto by 2024.

Crypto total market cap chart from Tradingview.com (Canada)

Why Edinburgh Is Zumo’s Crypto Hub

A conversation with Nick Jones, the co-founder and CEO of digital-assets infrastructure platform Zumo, on how being accepted to a blockchain accelerator and COVID-19 workplace changes influenced their choice to establish and remain in Scotland.