Stefano Capaccioli - Tassare o non tassare?

Okay, now let's move on to a topic that is completely different from what we've covered so far, but as I can see from the room, it's definitely a topic that interests a lot of people, so I'll call Stefano Capaccioli, founding partner of Coinlex and founder of the Capaccioli studio, up on stage—I'm always happy to speak with him and introduce him because I adore him—for his talk, "To Tax or Not to Tax." Thank you, thank you for the invitation. As a good accountant, I also have a jacket, but I abandoned it due to the heat. And today, as a typical post- lunch topic, so a very interesting post-lunch topic, we will talk about taxation, and so my title is To Tax or Not to Tax? This is the question.

Meanwhile, I am an accountant, auditor , and freelance journalist. I've been working in this world since 2013. I was one of the 30 blockchain experts at the Ministry of Economic Development, currently president of the Commission at the National Council on the taxation of new virtual economic realities, and editor-in-chief of the Cryptowallet magazine, which you can find on newsstands and is our latest crazy idea . to tax or not to tax, connected to web three and therefore connected to the DEPI. Let's start with the prologue.

In the tax and legal fields, words are important, so the first thing I want to point out is that Bitcoin, cryptocurrencies, and tokens are technical concepts that have nothing to do with law except for the substantive part, because the only two definitions we have within our legal system are virtual currencies and crypto-assets . So be wary of those who use technical concepts to talk about taxation. A further clarification, which is also semantic, and therefore purely lexical, is that the wallet, poorly translated as wallet, contains nothing. The wallet is a tool for managing your digital identity. A distinction is made between hosted, meaning held by an entity that stores your private keys or holds them on your behalf, and custodial, or non-custodial.

And this definition that I have always supported against all odds has now also been accepted by the Eud Wallet because if we look at the definition of wallet underlying the new Aidas 2, what is a European digital identity wallet? Even here it is poorly translated, but the substance is a means of electronic identification, so the wallet is a digital identity tool , an identity management tool. Let's start from the beginning because between to tax and no to tax we have seen the lexical part and the conceptual part which is fundamental. Let's start from the beginning. The beginning was when the crypto world met the tax authorities, it was tax me if you can, that is, try to tax me if you can.

The Bitcoin world has had it for years and since 2016, with an interpretation that I criticized the day after I read it, since September 3, 2016, the Revenue Agency has made Bitcoin virtual currencies assimilated to foreign currencies for tax purposes. What could possibly go wrong? Well, since 2016 they have not taken into account either the definition of virtual currencies which states that for virtual currencies, this is the anti-money laundering definition of the FATV FAFI which we then find in the anti-money laundering directive, in the directive against the counterfeiting of means of payment other than cash, it is written that it does not have the legal status of currency and in our internal law we instead have the positive definition of foreign currencies which refers to State Bank notes having legal tender, therefore with a substantial formal requirement. We will obviously challenge that interpretation in the Courts of the Italian Republics, and you have already seen something of it in some rulings of the Court of Cassation. This definition objectively leaves one perplexed and we will demonstrate its validity, not its invalidity.

From the tax, we've had an evolution from that Mefuken tax, that world left to the mere interpretation of the Revenue Agency, we've moved on to the European Parliament, which in 2022 began to put its head into trying to have a similar system throughout the European Union and therefore created an initial form of soft law, therefore of indication to Parliament, a gentle push to parliaments saying: " To prevent each country from doing what it wants, generating forum shopping and asymmetries in the European digital market, try to define what the crypto assets are that are under development. We're in 2022, the friend comes into force in June 2023. Define the tax-generating event, that is, when to tax, indicating crypto to fiat, because if we move towards crypto to crypto, therefore the exchanges between crypto and crypto, the European Parliament says be careful, there is the risk of an explosion of tax-generating events ." I have some clients who make 10,000 crypto transactions on crypto in a month . All it takes is a small bot and from this point of view the omelette is done.

And there's also a difficulty in valuation because everyone thinks about Bitcoin, but if we start thinking about who trades with shitcoins, going to find and do arbitrage between dex checks of, um, coins that have no valuation or very little valuation, going to find what the valuation is at that moment becomes absolutely complicated. determine a tax base in a fair and consistent manner with attention to the decentralized nature of the system. And how was it done? It was made in Italy and was introduced with the 2023 budget law, a new letter CXIA capital gains and other income generated with the positive definition of crypto assets and in Article 68 how they should be taxed. I'll spare you the discussion about threshold and deductible, which the Revenue Agency has managed to confuse between one year and another that do not have the considered threshold.

The year after Franchigia, it's hard to even understand why. What are the tax-generating events according to our legal system ? I'm showing you this because then, as things evolve, we'll see what the real problems are in Web Three and in DEPI . First of all, the capital gain is a transfer to a third party, that is, it leaves my wallet and enters the wallet of another who can be sold for a fee, I go to an exchange, on a check, convert it into euros, withdraw the euros. it could be a refund.

I insinuated myself into the bankruptcy of MT Gox for those who are more experienced in this sector, that of FTX, of Celsius and they are giving me back Bitgrail and they are giving me back the sums and so that is the form of reimbursement. From the bankruptcy of The Rock Trading I think nothing will come of it or the exchange. The exchange was foreseen in the case of a transfer for the exchange of goods or services. With Bitcoin I buy the Lambo, so in that case I have the demonstration or and here comes the slippery part, I convert them with other cryptoassets with different characteristics and functions. And here lies the ambiguity that we will see later.

In other income we have it in the case of detention it generates other income as a closing rule. Attention, so now I was looking to see if there was one, it's not there. Well, third-party payment, reimbursement, there is a fee. Correspondent means manifestation in euros, to be clear, therefore manifestation in legal tender. In the case of an exchange, the normal value at that time is relevant.

Furthermore, to close the temporary provision of the Me if you can tax, this capping provision has been introduced which states that capital gains relating to crypto-assets made before the date of entry into force of this law are considered realised. This is a rule that I'm giving you in advance today. A temporary, retroactive rule of questionable constitutionality, because from now on, anyone who parks here has to pay for parking; anyone who parked here in previous years has to fine me. In other words, something fundamentally doesn't add up. Now let's go to the to tax to tax which can be a detax or a tarta tax.

where we have the dettax and Tarttax part. Until 2022, the rate is 26% for capital gains only, under a legitimate provision of dubious constitutional legitimacy. In 2023, the Revenue Agency considered it as the threshold. What is the difference between threshold and reimbursement? Threshold when I exceed it ono off, so if I had had a capital gain of €2,100 €100, I would pay taxes on €2,000 €100.

Franchija pays only on the portion that is ceded. In 2023 they considered it a franchise threshold in 2024 . In 2000, I identified the loophole in the law that meant my tax rate was 12.50%, not 26%. If anyone can ask questions about the topic at hand.

In 2025 there will be no threshold in the 26% deductibles and from 2026 onwards the law provides for an increase to 33%. In an interview with Valentina I said and then we talk about the volatility of Bitcoin. It seems to me that the tax rate on cryptocurrencies is more volatile than Bitcoin itself, because it goes from maybe 12.50 to 26, to 33, it seems to me, in short, something is not working in this whole part, so about tax, detax, tartax let's get to the worrying part, I called this part a tragedy. First, to give you an idea, what databases does the Revenue Agency have available to detect potential tax evasion?

Obviously, we have all the databases, financial data, and cross-border transfers available. For those who don't know, every time you make a transfer of over €5,000 outside Italy, even within the EU, this data is reported and communicated to the Revenue Agency, and then ends up in the database for cross-border transfers to and from abroad. This means all the data coming from the common reporting standard, the system with which all countries that have joined CRS 120 automatically exchange year- end balances and transactions on the accounts of citizens of another country. So all the Italians who have accounts in France, Luxembourg, and all the other countries come to Italy. We then have the information exchanges of the states, we have the specific data because the OM receives all the data from the Italian exchangers every 3 months.

So every 3 months, Italian exchanges communicate to the OM who you are, your movements, your holdings, and the number of transactions carried out. So this database is available from January 1, 2023, to the third quarter of 2025. We also have a register of financial relationships with artificial intelligence, the real algorithm that is being finalized and in progress the DACT carf will arrive which is the global exchange of information relating to the stocks of crypto assets. Please note, this isn't meant to be terrorism, but rather information. If you decide or forget to file your tax return, and even if you file it, you forget to tell your accountant in good faith how many cryptocurrencies you have, you're guilty of filing a false tax return.

If your taxes exceed €100,000, then filing a false tax return means a capital gain of €380, and omitting €50,000 in the mail, resulting in a capital gain of €190,000. Where is the tragedy? And in this data, the first data are the data that the Undersecretary of Finance reported to the Finance Committee. It says on how many paid the 26%, therefore the substitute tax on crypto assets in 2023. They are 22,439 439 taxpayers with taxes paid of approximately 27 million.

This is the data that was communicated. The data communicated by the OAM instead are 88,000 customers or the OAM data, to be clear, are only the exchanges registered in Italy of which four are among the top 10 by volume . So this data is absolutely underestimated because OKX, Cucoin, to name a few, are not registered with OM and therefore are not part of this information. Bitenex, to give some examples that some of you or some of your friends or friends of yours normally use, as my friend Giacomo Zucco says, has 800, at least 886,000 customers who have had a consideration, consideration converted into euros, of 2.6 billion and a balance of 1.

5 billion at the end of the year. Now either 90% capital gains under €2000 or we have a problem. And it's not that we have a problem, the problem is real because this data is available to the Guardia di Finanza and the Revenue Agency, so the tax codes, the volume and so on will certainly be below, but in my opinion we have a problem. Maybe it also comes from the complexity and how they communicated the rule, how the rule was written, but this could certainly be a problem. And another point of attention is that most of those who, according to the OM, own crypto assets are under 40.

This is instead the positive news that will be the taxpayers, customers, users, and citizens of tomorrow. So this one and maybe those under 30 are the ones who are least familiar with the Italian tax system and they will never find you, since they have the data in hand, well, maybe think about it, it's like the child playing hide and seek. Know that every time you put money into your bank account it's like when Frodo puts on the ring. Mordor sees you. And we end with to tax or not to tax.

Because we have seen the tutax conversion, consideration, third party, exchange, but the moment I enter Web 3, enter Defi, enter a world where the third party does not exist or is no longer necessary, I find that cryptocurrencies and tokens are technical notions, not legal ones, they are under the control of the user because he does not transfer them. Smart contracts and protocols are without intermediaries. Be aware that in Web 3, decentralization is often more superficial than real, because often there are too many elements of centralization and there is no transfer or reimbursement. The only thing is that it certainly is, in the case in which in a Dex I convert Bitcoin, Ethereum or my tokens into an EMT stable coin, therefore something that has been authorized to us as MT, like Money Token. The fact is that all the types of ER, I've put some here, then obviously it's the fantasy that over time we will have 1000 others, in short these are the ones that they have managed to identify to date .

We have decentralized finance with staking consensus mechanisms, yield farming, liquidity providing on derivatives, the landing part which is an entire system where I don't transfer my crypto to third parties . some other forms of network types on the consensus mechanism or on tokens, the airdrop, the issuing, the tokenization, the reward of the DAOs, the bounties that are given on some of the centralized autonomous organizations and then the whole world of the NFTs, of the Creation economy, therefore the part of the transfer of NFTs which when they are not copyrighted. Finally with the part of the social engaged to earn or the part of X to earn which could be a behave, a play to earn, etc., all forms where there is no intermediary. So, going back to the beginning, let's see where the breaking points are, or at least the points of attention where we should scratch our heads.

Meanwhile, the concept of capital gains does not exist because I do not have the third party, except for the residual case of Dex with EMT token, which we are certain there, even if then it is all a problem to go and prove it tomorrow, but we have the other proceeds which is the closing rule and the other element is that the exchange between crypto assets with equal characteristics and functions does not constitute a fiscally relevant case. So the only two elements on which we need to concentrate our attention are these two because everything else is missing, that is, it is absolutely not applicable. In the meantime, let's see how much awareness the Revenue Agency has reached . For other revenues, the Revenue Agency only knows about staking. But he doesn't know staking like the technicians that you are, not me, you know?

No, for them, sting is when I give my crypto to Kraken to another exchange and they do and they give me back a portion of their staking earnings, but that's not staking, that's a form of deposit in which I'm given a return. But let's see what they have identified. In particular, when it comes to the deduction of proceeds from holding cryptoassets, such as in the case of staking, the proceeds are taxed in full without any deductions. And here I put it in bold because, as an accountant, it makes me laugh to say that it means that the perception of an income reduced by the percentage withheld by the platform operator, that is, because you read them and say "Yes, I understand that someone else has done a bit of theory", but it makes no practical sense because you can find this data on a Binance account statement and then we'll talk about it again because Binance gives me the net staking directly. there is no commission of his own.

And here we have the two problems in the case of staking, the moment on other income, the taxable moment, when I receive it and the determination of the consideration, because the law speaks of consideration, the normal way is only in the case of an exchange. Why do I ask the question of the moment of perception? Because, since I have a taxable event, the moment I have the moment in which I have to pay taxes, that is the moment in which I determine my obligation. But whoever wrote this rule, or at least if one wants to interpret it as meaning that the imperceptible moment is when they arrive in my wallet, does not know this world. Why is there no one who writes to me: "Dear Stefano, you received an airdrop on your meta address, on your Ethereum 0X address".

When I notice it, I notice it. I might notice it after an hour or after 10 years. There is a customer who realized after years that he had an airdrop of a swop on his old MetaMask address that he had left on an iPad and first said before formatting it I saw that I had my address and I found $50,000 of Uniswop years before. So for me the only solution is to convert it into euros, which is what gives me certainty at that moment, also because otherwise I risk, in some cases, that I get an airdrop that shows that cryptocurrency is worth something at that moment, and after a week my Terra Luna account collapses and I have to pay taxes on an income that I no longer have. So, given this first concern which is when, let's go and look at the second.

But when is the element, what are the counterparts, that is, the exchanges that are not relevant? Because given the other income when they can be relevant, which for me only when I convert them into euros. Let's look at the other side of the coin. The Revenue Agency is also a bit confused here. It's a bit confusing because, not having a full understanding of this world, he confuses the technical part with the legal part.

Meanwhile, regarding money tokens, I believe the key element, therefore regarding stable coins, is the right to receive the return of the underlying asset, and therefore one might say according to the Revenue Agency, but I tell you that presumably according to the Revenue Agency's circular, remembering that it is neither a source of law nor that they are obliged to follow it. according to the revenue census, therefore the element of being authorized as a money token is the discriminating element at least on circular 30/E. Furthermore, he says that for all those others he makes this distinction that I objectively still haven't understood why he put it in circulation because it doesn't make sense, because it distinguishes me. Cryptoassets can be divided into two categories. When you start like this in the crypto field, you start off very badly because it is a world that does not follow the normal rules and therefore anyone who can classify me could tell me that there are Bitcoins and non-Bitcoins.

This is a classification that I can accept, but even there when you do Bitcoin it could be Bitcoin, Bitcoin Cash, Bitcoin Diamond, Bitcoin Satoshi Vision with all the forks it had and then they distinguish between uned and asset-linked stable coins and then distinguish on the basis of payment tokens, security tokens, utility tokens and fungible tokens and non- fungible tokens. forgetting they put three functional concepts that are used by PILMA and the last one that doesn't make sense because the non- fungible token is the RC 721 which is basically a piece of code that does things and when they write to me if I transform, if eh I move from a Bitcoin to a if with a Bitcoin I buy an NFT is eh a taxable element, I always make the joke, but if that NFT represents a UTxo to me which I have wrapped in a Bitcoin, basically I haven't changed anything because the economic substance underneath is exactly exactly the same. And so here we are faced with a problem that currently has no solution because there are no definitions. In my opinion, the characteristics, the only ones we could say those that are in DLT and those that are not in a distributed technology as characteristics, cryptoassets being an extremely broad concept. And the functions, but in my opinion we should find the functions only within the market-to-asset regulation, those that at least we know how we can have a regulation that protects me like EMT, Arturity token and other utilities and everything else.

So , in my opinion, these could be the functions, because the functional characteristic that the Revenue Agency has established has no regulatory reference and, moreover, that distinction between utility tokens, security tokens, and pain tokens arises in Switzerland. And it was used by FINMA to understand whether or not you were subject to their regulations when you did ICOs. And so, in my opinion, the only system is to consider crypto fungible tokens and artica category on the same functions. obviously both layer 1 and layer 2 have fungible tokens in various forms in order to be able to propose objective criteria because the worst thing that can exist in the tax field is ambiguity and arbitrariness on the part of the official who might come to check me. Stable coin: The Revenue Agency sets redemption as the deciding factor.

I tell you, let's pay attention because USDC is certainly an authorized EMT because since July 1st it has been authorized in France Circol. Algorithmics like, come on, we're totally out of this world because there's no underlying, even if they refer to a dollar. what lies in between. I raise numerous doubts, I don't hear myself say either yes or no, but those who convert into USDT and then decide not to declare, objectively then expose themselves to a risk because in some checks they contested it to me . In NFTs, I point out that technique is confused with use because if I take an NFT token and split it with the RC404, I have made a fungible token of a non- fungible token and I short- circuit the Revenue Agency and finally on the whole part of the economy of creation with NFTs and all the element to understand and when can the use of works of the mind and the epilogue be, what is the solution I bring you?

Because obviously, having walked you through the whole process, I have to give you some solutions, and unfortunately, regarding the not-to- tax, I can tell you that there is no one-size-fits-all solution. For every single earning we have on Web 3, on DeFi, on decentralized systems, we will first need to understand the substance over form, meaning, don't get stuck on the form of what I 'm doing, but let's get to the substance. The second aspect is to understand when it is work income, because some forms of issuing, some forms of NFT transfer have a type of work. Some Xerns have a type of work and therefore work-related income, so we should regulate them in this way and then clearly define for each individual item whether it can be a tax-relevant exchange or whether it can be another income. I thank you for your attention and for listening to me after lunch on a not-so-sexy topic.

Yes.