Cryptocurrency Exchange Bithumb Files to Have Their Tax Bill Annulled

South Korea’s leading cryptocurrency exchange Bithumb has just filed a complaint against the National Tax Service (NTS) regarding the recent groundless tax fee of around $69 million the agency imposed last November.

According to local news, the exchange has filed a complaint with the Tax Tribunal, claiming the tax fee, imposed in November 2019, to be groundless as digital currencies are not legally recognized as currencies and therefore the agency lacks the authority to impose a tax on any kind on their assets.

The article quoted an anonymous Bithumb official, who commented on the issue:

“We paid the full amount and have since been preparing for arguments. We believe we will be given a chance to clarify our stance in court.”

Concurrently, the agency stated it had imposed a withholding tax of over $69 million on Bithumb’s foreign customers’ income last November. Mostly applied to employment income, a withholding tax – also known as a retention tax – is an income tax paid to the government by the payer of the income rather than by its recipient.

The agency then claimed that gains withdrawn in Korean won from accounts held by foreigners are taxable income. In other words, the NTS classified the exchange’s cryptocurrency trading of foreigners as miscellaneous income, recognizing capital gains as assets.

Choi Hwoa-in, an adviser to Korea’s financial regulator, the Financial Supervisory Service, refuted this by arguing that cryptocurrencies are not considered an asset under the current law of the country, and therefore, it is not taxable.

“The Ministry of Economy and Finance already made that clear. The NTS pushing ahead with the tax imposition is baseless and groundless, especially since it is still awaiting the ministry opinion on the same matter it sought again.”

Furthermore, Choi noted that the exchange „filing a suit after paying the full amount in that sense is a calculated move expecting partial to full return of the amount paid.“

The Tax Tribunal will have 90 days to determine whether to grant or dismiss Bithumb’s motion seeking to nullify the 80.3 billion won ($69.1 million) in withholding tax the NTS imposed last November.

An anonymous NTS official told The Korea Times that as the matter is ongoing, they cannot comment.

Meanwhile, the dispute coincides with ongoing efforts to impose tax on the new form of digital currency, which has long been criticized for its use as a means of speculation among seekers of short-term windfall gains. It also follows the growing public protests that demand fair taxation based on the principle that “where there is an income there should be a tax.”

New Anti-Money Laundering Directive Prompts Deribit to Move Operations Overseas

Prominent Cryptocurrency Futures and Options Exchange, Deribit has announced that it will be moving its operations to Panama.

The derivatives platform announced it is leaving the Netherlands to avoid strict regulations of the Fifth Anti-Money Laundering Directive (5AMLD) that is set to come into force in 2020.

Deribit informed through a blog post that from 10 February 2020 the platform will be operated by DRB Panama Inc., a 100% subsidiary of the Dutch entity.

The latest regulations become effective on January 10, with European countries encouraged to start the implementation of know-your-customer measures for cryptocurrency companies. Cryptocurrency firms will be directed to register with local authorities and obtain information about the source of funds from their users.

European nations are expected to follow the baseline measures of 5AMLD, but every country can individually go above and beyond if desired.

The company claimed the Netherlands’ adoption of “very strict” anti-money laundering (AML) regulations applied to cryptocurrency firms spurred the decision to move elsewhere.

“If Deribit falls under these new regulations, this would mean that we have to demand an extensive amount of information from our current and future customers,” according to the blog post. 

Several cryptocurrency companies decided to close down, citing issues of customer privacy. Deribit, motivated to continue providing their service chose to move their operations.

While the user experience will remain the same, the servers will be moved to London, and all client positions, holdings, equity, trade history, fees, rate limits, wallets, portfolio margin arrangements and other systems will be transferred from the Dutch Deribit B.V. to the Panama subsidiary.

“We believe that crypto markets should be freely available to most, and the new regulations would put too high barriers for the majority of traders, both – regulatory and cost-wise,” said the company.

Additionally, Deribit will also be introducing its know-your-customer (KYC) system. This will be implemented with the help of software firm Chainalysis and verification and payment company Jumio. The KYC requirement will be enforced for traders that want to withdraw amounts higher than 1 BTC per day.

At the same time, U.S. customers will remain barred from operating on its platform.

Qatar Financial Authority Introduces Ban on Cryptocurrency Services

The Qatar Financial Centre Regulatory Authority (QFCRA) – the country’s regulatory authority – has recently issued a blanket ban on cryptocurrency-related services.

According to a press release, the ban includes not only digital currencies but as well as anything of value that could substitute fiat currencies. Respectively, citizens are banned from cryptocurrency trading and any services that involve trading and transferring digital assets and using it as a payment method or for investment purposes.

“Virtual Asset Services may not be conducted in or from the QFC at this time,” reads the statement issued by the financial regulator.

According to the Regulatory Authority virtual asset services are defined as the exchange between crypto and fiat or crypto and crypto, transfer of crypto assets, safekeeping or administration of virtual assets or tools for their management, and participation in or provision of financial services related to virtual assets.

The new rules were revealed by the QFCRA in a tweet published on December 26th, announcing that authorized firms are not permitted to provide or facilitate the provision or exchange of crypto assets and related services until further notice.

“The Regulatory Authority shall impose penalties in accordance with its rights and obligations […] in case of any violation of undertaking […] activities that are not permitted in the QFC.”

However, the ban doesn’t cover digital forms of securities or other financial instruments that are thoroughly regulated by the regulator, as well as the other governing bodies, including the Qatar Financial Markets Authority, and the Qatar Central Bank.

In the meantime, companies that deal with cryptocurrencies have been ceasing their operations due to the particularly strict anti-money laundering regulations.

Most recently, Qatar has adopted new Anti-Money Laundering and Counter-Terrorist Financing norms, which will require stricter Know-Your-Customer (KYC) and AML procedures, as well as monitoring of all transactions.

Qatar is not the only country to tighten its stance on cryptocurrencies. Companies who deal with cryptocurrencies and related services in the European Union will have to comply with the new directive that comes into effect on January 10th.

Although the financial regulator hasn’t explained why the QFC has taken such a hostile stance towards digital assets, it is likely that the country – like most other countries that have banned crypto – feels threatened by the decentralized nature of cryptocurrencies and regards it as a risk to national security and existing financial system.

In addition to that, the decision doesn’t come as a surprise considering the fact that Qatar had already established a prohibition on Bitcoin trading in 2018 by labeling it as a highly volatile asset that could be used to facilitate financial crimes and is exceptionally prone to cyber-attacks and risk loss of value.

Meanwhile, Qatar is not the only region to have issued a ban on cryptocurrency. In April 2019, the Indian government reportedly began inter-ministerial consultations on a draft law to ban cryptocurrencies outright, known as the Banning of Cryptocurrencies and Regulation of Official Digital Currencies Bill 2019. China has also banned domestic cryptocurrency exchanges since September 2017.

South Korea Wants to Tax Cryptocurrency Profits

The South Korean Ministry of Economy and Finance confirmed that it cannot impose income taxes on individuals’ profits from transactions of cryptocurrency under the current existing tax law, according to a press release on December 30th.  The ministry clarified in the press release, saying that profits from individual virtual asset transactions are not listed income and are not taxable.

Under the current tax law in South Korea, not all capital gains from financial investments are subject to taxation, and taxes cannot be imposed on income from activities that are not explicitly defined under the tax law. The term “virtual currency,” or any other term it is known by, is not included anywhere in the tax law, therefore its transactions cannot be taxed.

However, the ministry disclosed that will levy taxes on digital assets through a tax code revision bill at a later date. The institution further noted that discussions have already been taking place, and the revised bill is expected to be drawn up by the first half of 2020.

At the moment, digital currencies currently have no legal status in the country. In order for the bill to be amended, South Korea first needs thoroughly clarify several issues such as the definition of digital assets and its legal status and whether gains in cryptocurrency transactions are similar to gains in other assets, such as stocks or real estate.

In addition to that, the government must deliberate on how it plans to obtain trading records from crypto exchanges to accurately levy taxes. The amendment would also require South Korean exchanges to implement Know-Your-Customer (KYC) for its users in order to collect accurate information about the trading activities of each trader.

In the meantime, the government will be assessing international trends and the approaches of major countries to crypto taxation in an effort to amend the existing Korean tax law to include cryptocurrency.

Emphasizing that cryptocurrency would need legal status before it can be added to the law, the ministry elaborated:

“We are preparing a taxation plan for virtual assets by comprehensively reviewing the taxation of major countries, consistency with accounting standards, and trends in international discussions to prevent money laundering.”

Meanwhile, the news comes clashing with the National Tax Service’s (NTS) most recent imposition of an 80 billion won ($68.9 million) tax bill on Bithumb Korea – one of the largest crypto exchanges in the country.

However, it remains unclear how the NTS was able to identify trades made by Bithumb’s foreign users unless the regulator has information like the customers’ phone number and their country codes.

As such the exchange is planning to file for legal actions against the imposition, stating that the company pays corporate and local income taxes annually and since taxation rules have not yet been applied to the cryptocurrency trading industry, Bithumb feels compelled to file against paying the tax bill.

Coinbase Forced to Remove Dapp Browser Integration from Apple’s Store

United States-based cryptocurrency exchange Coinbase has recently announced that might remove the decentralized application (Dapp) browser feature from its crypto wallet application in order to comply with Apple’s store policy.

According to a Reddit post published on December 28th, Coinbase may have to remove the dapp browser functionality from Coinbase Wallet to comply with App Store policy.

Coinbase CEO Brian Armstrong seemingly confirmed the browser’s impending removal, who expressed concern over Apple’s recent move in a response to the Reddit post.

“This is really unfortunate to see. Apple seems to be eliminating usage of Dapps from the App Store,” said Armstrong.

 “If Apple customers want to be able to use Dapps, we may need to make this request know to Apple in some way. This is an important area of innovation in finance, and many developers and early adopters of this technology have millions of dollars worth of crypto tied up in these financial applications, which they will no longer be able to use on Apple mobile devices if this app store policy continues.”

According to Armstrong, this is beyond the company’s control and this could presumably extend to other wallets as well such as Trust, Argent, Metamask. He further said he believed this to be a big threat to the ecosystem.

Notably, Coinbase has already erased all of the language about the dapp browser from the App Store — a stark difference from the Google Play store, where the dapp browser is actually in the app’s name. In the meantime, users can still access DApps through Coinbase Wallet on their desktop devices by simply scanning a QR code via its WalletLink feature.

At the moment, neither Coinbase nor Apple has released an official statement regarding the recent policy enforcement. It remains to be seen whether Google will follow suit with Coinbase Wallet, although the recent removal of Metamask from the Play Store doesn’t bode well.

As mentioned above, the news comes shortly after Google banned Ethereum wallet and DApp browser MetaMask from its Android application distribution platform Google Play.

Meanwhile, cryptocurrency Influencer Omar Bham suggested that these actions were taken to protect the firms’ businesses against potential decentralized competitors, according to a tweet published on December 28th:

“Web3 is in direct competition with Google & Apple. We should expect continued censorship on MetaMask, Coinbase, & other dapp browsers.”

On December 23rd, cryptocurrency influencers started claiming that Google’s user video streaming platform YouTube started censoring their content. After many of content creators started speaking up, the platform reinstated some of the content, but many of the affected YouTubers noted that their videos were not restored.

Two days later, YouTube restored more of the content and the firm’s team stated in a tweet that the initial issue had happened due to an error in the review process. After the incident, some of the content creators turned to decentralized content sharing platforms.