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Europe’s DeFi tax gap won’t last forever, says ex-OECD official

•2 min read
Europe’s DeFi tax gap won’t last forever, says ex-OECD official

A former official from the Organisation for Economic Co-operation and Development (OECD) has suggested that the tax gap in Europe’s decentralized finance (DeFi) sector may soon be addressed. Colby Mangels, who is now with Taxbit, highlighted that while current regulations under the Digital Assets Classification and Reporting Framework (DAC8) and the Crypto Asset Reporting Framework (CARF) do not encompass DeFi activities, this may change in the near future.

Mangels pointed out that the landscape of regulatory enforcement concerning anti-money laundering (AML) is evolving. Governments and regulatory bodies are increasingly focused on ensuring that all forms of financial transactions, including those conducted within DeFi ecosystems, are transparent and accountable. This shift indicates that the DeFi sector, which has so far enjoyed a degree of leniency regarding tax obligations, may soon be subject to stricter scrutiny.

The lack of regulation in DeFi has allowed for significant growth, but it has also raised concerns about tax compliance and potential illicit activities. As governments look to close the tax gap, Mangels emphasized that the integration of DeFi into existing regulatory frameworks is inevitable. The enforcement of AML regulations suggests that the current gap in reporting and tax compliance is a temporary situation.

For instance, as more countries adopt comprehensive tax policies for digital assets, DeFi platforms may soon find themselves needing to implement mechanisms to report transactions and comply with tax obligations. This evolution will likely require a collaborative effort between DeFi projects and regulators to establish guidelines that ensure compliance while promoting innovation in the sector.

In summary, as regulatory bodies across Europe and beyond enhance their focus on DeFi, it is crucial for stakeholders in the crypto space to prepare for forthcoming changes. The proactive adaptation to these regulations could help sustain the growth of DeFi while ensuring that it contributes to public finances.

Key Takeaways

This article was inspired by reporting from CoinTelegraph. · Report an issue

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