HM Revenue & Customs is pressuring cryptocurrency exchanges to reveal customers' names and transaction histories, in a bid to claw back unpaid taxes.
The UK's tax office has sent letters over the last week to at least three exchanges- Coinbase, eToro, and CEX.IO - to inform the regulator about users' transactions in order to identify tax evasion, specialised outlet Coindesk reports. The US-based Coinbase has previously handed over the customer database to the US authorities last year under a federal court order.
One industry insider, speaking to Coindesk said: "HMRC is looking to work with exchanges when it comes to finding information on people who have been buying and selling crypto. I think they will only go back a couple of years, two or three years.
HMRC is looking to work with exchanges when it comes to finding information on people who have been buying and selling crypto"
"If they [HMRC] do only go back two or three years, I think the interesting thing here is, that the individuals who went into crypto very early on in 2012-13 will not be affected. The ones who probably made the largest gains won't be affected, it will be the people who came in around the time crypto peaked."
Cryptocurrencies are currently classified as capital assets in most jurisdictions. Based on HMRC's own classifications, which were only released in December, a taxable event occurs if users sell their cryptocurrencies, or swap them for other digital assets.
Because one of the main motivations for purchasing crypto is to speculate on the value, holders are liable to pay Capital Gains Tax in the U.K. Depending on income as well as capital appreciation, holders can face a tax bill of up to 20% off the value of a single transaction.
Most recently, the US Internal Revenue Service (IRS) sent letters to taxpayers who might have failed to report income and pay the resulting tax from cryptocurrency transactions. Warning them of stiff penalties if they fail to report income or pay tax on crypto holdings, the IRS said over 10,000 taxpayers are expected to receive letters by the end of August.