The Central Bank of Portugal did not consider cryptocurrency as a legal tender. These views are in line with many countries around the world where cryptocurrency. Thisdoes not hold any legal tender status in any jurisdiction. This includes the United States, where cryptocurrency is currently being actively traded. However, Portugal is actively looking towards European regulatory guidance about cryptocurrencies since they are overseeing the general picture.
The Eurogroup consists of 19 Finance ministers of the European Union, who will meet once a month to talk about themajoreconomic and monetary policies which are implemented across the European Union. Finance ministers from France, Germany and the UK has proposed that cryptocurrency regulation should be coordinated at a global level with discussions takingcenter stage at the upcoming G20 meeting in Buenos Aires, Argentina.
The Ripple effect
Portugal is hinting that a coordinated regulatory solution is looming ahead of the country. The extreme price volatility associated with cryptocurrencies have Portuguese bank feeling unsure about how they are going to react to cryptocurrencies. In December 2017, Bitcoin’s price first surged 100% to $20,000. Then, it made a dive to 50% of its value, which also effectively brought out the price of other cryptocurrencies in its wake.Banco Santander-Portugal, the fourth largest Portuguese bank has since then stopped its customer’s cryptocurrency trading activity.
As a result of this, more than 1000 of its customers has protested against the bank by signing a petition. They claimed that the bank was straying away from the financial innovation trend and ignoring the technology could shift which is brought about by blockchain. Countries all around the world are adopting the technology and Portugal should not be left behind. Some customers even went on to file complaints withthe DECO, country’s consumer protection organization.
After much pressure, the Santander Group began to use blockchain technology in their system. Thiswas implemented in the fourth quarter of 2017. Among the benefits include reducing the costs and also enabling cross-border payment transactions that are faster and more efficient. In fact, Banco Santander-Portugal has also changed their mind about their policy to shut down their customer’s cross-border cryptocurrency treats at foreign cryptocurrency exchanges.
They also stated that they are currently committed to creating a leading international blockchain payment ecosystem that will present a significant opportunity for cross-border payments globally.Banco Santander-UK began since then began to work with American Express and the Ripple network to allow American Express US business customers to make instant, traceable cross-border noncard payments using the blockchain network RippleNet – to Banco Santander-UK.
Taking a huge leap of faith
Ripple is delighted with the cooperation between the bank and American Express.RippleNet provides optional access to Ripple (XRP). Currently, Ripple is the third largest cryptocurrency in the market based on market capitalization value. Since its inception in 2012, Ripple aims to provide secure, instead and nearly free global financial transactions. It does not matter the size of the transactions; there are going to be no chargebacks. It supports tokens which represents fiat currency, cryptocurrency, commodity or any other unit of value that is frequent flyer miles or mobile minutes.
At the moment, it will require two parties for a transaction with the Ripple to occur. Firstly, the regulated financial institution which will function to take funds and issue balances on the health of the customer is not,on the other hand; it requires the presence of market makers such as hedge funds or currency trading desk which provide liquidity in the currency that they want to trade in. Positive news for the adoption of Ripple is that more than 100 banks and payment networks have adopted their system as a settlement infrastructure technology.
Good news for personal income taxation
After the reinstatement of Portuguese customers the ability to treat cross-border on foreign cryptocurrency exchanges, more good news arrived in Portugal. Personal income taxation does not applyto cryptocurrencies. A recent ruling from the Portuguese tax administration stated that gains from the sale of cryptocurrency would not be taxed in Portugal unless the individual taxpayer carries a business or professional activity and earns that income within the context. Therefore, the sale will not be taxable as a personal income, particularly as a capital income or capital gains.
Therefore, unless the individual taxpayer carries an active trade or business, which released the cryptocurrencies, any income from the sale or purchase of cryptocurrency will not be subject to tax in the context of personal income tax. Taxation can only take place when the regularity constitutes a business or professional activity for the taxpayer.
This is good news for Portugal is cryptocurrency investors as they would not be charged cross-border attacks in addition to personal income tax. However, any individual Portuguese taxpayers to undertake cross-border cryptocurrency transactions on a foreign cryptocurrency exchange may be subject to cross-border taxes which are imposed by foreign countries that may be minimized or eliminated under an income tax treaty.
In recent news, the European Union has recently called for a formulation of an appropriate proposal for tax legislation. The European commissioner in charge of consumer defense has proposed that individual cryptocurrency gains in Portugal should be taxed in the same manner as stocks. Meanwhile, DECO’s tax proposal is very similar to the matter in with the USInternal Revenue Service (IRS) taxes cryptocurrency gains. The IRS characterizes cryptocurrencies as property. Therefore, every time that it is transferred, it might trigger a game. Hence, the trader or investor will be subject to US taxation.
In the US, a cryptocurrency held as a capital asset will be taxed as capital gains. However, a cryptocurrency held as an inventorying, or for resale by a taxpayer can be taxed as an ordinary income. Meanwhile, if it is used as a means of payment, it will be treated as a currency, converted to fire at its fair market value on a cryptocurrency exchange and it will be taxed as an ordinary income.
Since cryptocurrencies are commonly used in cross-border transactions, US source cryptocurrency gains of non-resident taxpayers will be subjected to a withholding tax that can be reduced or eliminated under an income tax treaty. Therefore, any cryptocurrency -related income which is traded over the Internet will be determined under the internal communication source rule.
In conclusion, Portuguese cryptocurrency traders are very excited about trading cryptocurrencies cross-border on foreign cryptocurrency exchanges. However, they are urged to take into consideration the tax laws in all the jurisdiction that they traded and store the cryptocurrencies in secure foreign wallets to avoid hacking risks.