Taxing Stablecoins (IMF Fintech)

Summary

• Tether and USD Coin attempt to maintain a stable value by being purportedly backed one-for-one in value to underlying assets.p.8
• Australia amended its goods and services tax (GST) law in 2017 to align digital currency treatment with state fiat currency.p.12
• Singapore began treating digital payment tokens as currency for GST purposes effective January 1, 2020.p.13
• New Zealand Inland Revenue considered adopting GST exclusions for crypto assets retrospectively to 2009.p.13
• MakerDAO smart contracts permit users to generate Dai of up to two-thirds the value of pledged Ether collateral.p.19

Key insights

1. 1. Tax law requires a single predominant classification for a given stablecoin, unlike regulatory frameworks where multiple regimes can apply concurrently.p.10
2. 2. Treating a supply of money as an exempt supply rather than an out-of-scope supply reduces input tax credit entitlements for taxable entities.p.11
3. 3. The Court of Justice of the European Union ruled that exchanging traditional currencies for non-traditional digital money is a VAT-exempt financial transaction.p.12
4. 4. Categorizing stablecoins as derivatives under Australian and Singaporean tax approaches requires their supply to be exempt rather than ignored as money.p.13
5. 5. Treating stablecoins as property for income tax purposes converts every payment into a realization event, increasing compliance burdens.p.18
6. 6. Discrepancies in stablecoin tax classifications across jurisdictions create risks of double taxation or double non-taxation.p.20
7. 7. The OECD Crypto-Asset Reporting Framework facilitates automatic exchange of tax information on transactions involving crypto assets.p.20