Despite the turmoil in the digital assets market, Web3 developers, institutional investors, and authorities ready to tax metaverse earnings remain stable.
Selva Ozelli, an international tax attorney and CPA, writes a monthly Expert Take piece about the intersection of emerging technologies and sustainability, as well as the latest developments in taxes, AML/CFT regulations, and legal challenges influencing crypto and blockchain.
Nonfungible tokens, which artists issue, display, and auction, and investors buy, sell, and trade, become the most disruptive force in art in 2021. However, by May 2022, NFT sales had fallen by 92 percent from their high. In May, more than 17,000 IT workers lost their employment, according to data aggregator Layoffs.fyi. The recent decline is reminiscent of last year, when popular cryptocurrencies such as Bitcoin (BTC) and Ether (ETH) dropped by 80% or more.
Web3 engineers, institutional investors, and authorities ready to tax metaverse gains are peacefully going about their business around the world, oblivious to the digital asset market’s manic depressive volatility.
As central banks begin to tighten monetary policy against a backdrop of slowing economic activity, the NFT bear market may have served as a warning to high-level financiers at the World Economic Forum in Davos, Switzerland. And gone are the days when central bankers were worried about hedge fund managers; now they’re worried about the “Metaversians,” who are using artificial intelligence to digitise various parts of life in 3D.
Digital assets and businesses established in the Metaverse are among several issues presenting challenges for countries relating to cross-border tax, money laundering, consumer protection and personal data legislation. For this reason, the Organization for Economic Cooperation and Development (OECD) published a public consultation document on March 22 on a new global framework for fiscal transparency that would allow the presentation of reports and the exchange of information regarding crypto assets. It also covers proposed amendments to the Common Reporting Standard (CRS) for countries’ automatic exchange of information regarding financial accounts.
The new framework would increase the ability of participating countries’ tax authorities to monitor the transactions residents make on foreign cryptocurrency exchanges. Most, if not all, of the 100-plus countries participating in the CRS are expected to adopt it.
The U.S. has already adopted measures requiring taxpayers to report digital asset tax information.
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