Cryptocurrencies Could Cause Unlimited Losses for UK Government | Crypto-currencies

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The government could face unlimited losses due to the bankruptcy of companies that accept payments in untaxed and untraceable cryptocurrencies, an insolvency expert has warned.

A growing number of companies, including ethical cosmetics company Lush and office-sharing company WeWork, have started accepting payments for goods and services in cryptocurrencies such as bitcoin, as well as debt, credits or cash.

But while the change has been welcomed by crypto enthusiasts, experts say it could be an easy way for administrators to hide money from authorities, especially when companies go bankrupt.

Julie Palmer, managing director of insolvency firm Begbies Traynor, said the growing popularity of cryptocurrency payments would make it harder for administrators to wind up a business after it fails to figure out where money comes in and whether owners, staff or directors illegally withdraw funds from the business.

This means criminals could walk away with income that would typically be collected and distributed to creditors, including HM Revenue and Customs tax collectors and local authorities.

Palmer said without new regulations and tax plans the government could face huge losses. The potential is limitless, depending on its popularity, she warned.

It is the latest threat to emerge from the growing popularity of cryptocurrencies, which have been linked to money laundering and black market transactions.

Criminals hoping to conceal wealth from tax collectors and administrators have traditionally had to go through the onerous process of setting up an investment vehicle, such as an offshore trust, to hide money. In recent years, it has become easier for small businesses, traders and criminals to accept payment in cryptocurrency by setting up online virtual wallets.

With the trusts, we could at least see the source of that money and where it went, Palmer said. But with cryptocurrencies, which are more difficult to trace, we are even less likely to trace them and see the money that has been withdrawn.

Palmer has said there is nothing there is nothing the insolvency profession can do to resolve the issue on their own and believes UK authorities who are a year or two behind the US on the matter should take action and introduce laws to ensure that crypto-assets are properly regulated and taxed. This is potentially a significant loss of tax revenue, she said.

HMRC said it recently published a manual outlining the tax consequences of different types of crypto-asset transactions.

A spokesperson for HMRC said: We are taking action, including using powers conferred by Parliament to collect data from a range of information sources, to identify and investigate those who have not. declared all their income and earnings, ranging from individuals operating in the hidden economy, to sophisticated organized crime groups and offshore structures used to hide income and other assets.

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Treasury is reviewing evidence from a consultation on how to regulate cryptoassets.

The review is taking place at the same time that the Bank of England and the Treasury are assessing the possibility of integrating digital assets into the UK monetary system, potentially via an asset issued by the Bank sometimes referred to as Britcoin.

While the bank has indicated it is open to the idea, its chief economist Andy Haldane dismissed as fanciful the idea that existing cryptocurrencies such as bitcoin could become a standard payment mechanism.

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