FATCA Tax Data Grabbed From Leading Cryptocurrency Exchange


Leading cryptocurrency exchange Bitfinex has told customers that the company is supplying their personal and financial data to the tax authorities.

In a letter, Bitfinex explains that a tax avoidance crackdown in the British Virgin Islands, where the exchange is based, requires the information is filed by law.

The move follows pressure on the British Overseas Territory from the UK government to remove a cloak of secrecy from customer dealings in line with international tax laws which was exposed in the Panama Papers scandal.

Under the controversial American Foreign Account Tax Compliance Act (FATCA), tax authorities in the British Virgin Islands are compelled to disclose information about their accounts and investments controlled by US citizens.

A similar rule called the Common Reporting Standard (CRS) is also operated by more than 50 countries by the Organisation of Economic Co-Operation and Development (OECD).

Customer identities verified

To comply with the rules, Bitfinex must verify the identity and tax residence of all their customers.

“We request you complete the appropriate self-certification form and upload it to your Bitfinex account by May 24 at the latest,” says a letter from Bitfinex to customers.

“You are required to provide us with such information.

“As a reminder, by agreeing to our terms of service you have agreed to use the web site in compliance with the appropriate laws or regulations.”

It seems the letter is politely pointing out to customers that their financial data will be transmitted to the appropriate tax authority and warning that if they have not paid the correct amount of tax, they may be subject to an investigation in their home country.

Corralled into tax reporting

The action follows moves by governments worldwide to tighten up tax reporting for cryptocurrency traders.

The paradox is many traders are involved in digital currency transactions because of the anonymity afforded by the borderless, unregulated market.

But they are corralled into tax reporting because governments are ready to allow a free-for-all sector without frontiers for trading, but want their share of the profits by forcing exchanges to hand over customer data to tax authorities.

Bitfinex has further announced only customers with a self-disclosure obligation have received the letter and that other customers need do nothing.