Russia’s tax agency’s chief warns that cryptocurrencies could erode tax profits.

According to the head of the country’s tax agency, cryptocurrencies pose a unique threat to Russia’s taxation activities. In an interview, he said his agency closely monitors digital currency activities for tax evaders but acknowledged that digital currency users are easy to track as they leave an immutable digital footprint on the blockchain. Russia has banned cryptocurrencies as a payment method but has allowed citizens to hold them as an asset. 

Russia regards digital currencies as taxable property.

Russia has banned digital currencies as a payment method but has allowed citizens to hold them as an asset. The country’s law regards digital currencies as taxable property. In an interview with Russia’s media conglomerate RBC Group, Daniil Egorov, the head of Russia’s Federal Tax Service, revealed that digital currencies are one of the areas that his agency is worried about.” We are watching this market closely and understand that this payment system can significantly erode the taxation base,” he told the outlet.

The tax agency is looking to be proactive in finding a solution to curb tax evasions.

The Tax Service, which succeeded the Ministry of Taxes and Levies earlier in 2004, is looking to be proactive in finding a solution that curbs digital currency tax evasion for good. Russia wouldn’t be the first country looking to curb suspected tax evasion through cryptocurrencies or raise more taxes from the sector. Earlier, in the United States, the Biden administration passed the Infrastructure Bill that’s seeking to raise more taxes from the sector. In a report, the U.S. Treasury stated, “Cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly including tax evasion.”