Cryptocurrencies are untraceable, according to an insolvency expert.
The warning came after a growing number of companies in the United Kingdom began taking payments in cryptocurrencies, aside from credit, debit, or cash.
Cryptocurrencies Could Lead to Government Losses
Crypto-enthusiasts had welcomed the changes with open arms. However, financial experts pointed out that cryptocurrencies can make it easier for directors to hide payment transactions from authorities, especially when a business files for bankruptcy.
Julie Palmer, a managing director at Begbies Traynor, stated that the cryptocurrency payments would make it harder for administrations to trace where the money came from and where it went.
It will also be challenging to know if business owners are using cryptocurrency to receive funds illegally.
Palmer added that criminals could easily walk away with money that should be distributed to creditors instead, including tax.
The U.K. government could face massive losses if no new taxation plans and cryptocurrency payments were released, according to The Washington Posts.
The Dark Side of Cryptocurrencies
Criminals use cryptocurrencies to conceal their wealth from tax collectors. They even go as far as set up offshore trusts to hide their cash.
Tradespeople, small businesses, and criminals can easily receive cryptocurrency payments through virtual wallets.
Palmer said that with traditional payment methods such as cash, debit, and credit, it is easier for local authorities and tax collectors to trace where the money went and who received it. But with cryptocurrencies, it is untraceable.
Palmer added that currently, there is nothing that insolvency experts and tax collectors can do to fix the ongoing issue.
The U.K. authorities are the ones who need to take action and introduce new laws to make sure that crypto-assets are taxed and regulated.
If no action is taken, the losses could affect the U.K. government.
The HMRC, the department responsible for collecting taxes, released a manual showing the tax consequences of different cryptocurrency transactions.
A spokesperson for the HRMC said they would be taking action against those who will use cryptocurrency to hide their transactions. They will be gathering data from numerous information sources to identify and investigate those who will not declare all of their income and gains.
Meanwhile, the U.K. Treasury is reviewing evidence from a consulting firm on how they can regulate crypto-assets. The Bank of England is also reviewing the given evidence.
Both establishments are now weighing up the possibility of crypto-assets being integrated into the monetary system, according to CNBC.
While the Bank of England had stated that it is open to the idea of crypto-assets, its chief economist Andy Haldane dismissed the idea that cryptocurrencies could become the new payments mechanism.
Whether the Bank of England or the U.K. Treasury will release new regulations to fight criminals who use cryptocurrency is still unknown. The public can expect an official statement as soon as they've reviewed all the data given by financial firms.
This article is owned by Tech Times
Written by Sophie Webster