The Russian government is tightening its grip on the cryptocurrency market in order to track down and prevent tax evasion.

In Russia, the crypto market is being closely scrutinized by the government, which is attempting to prevent people from dodging taxes by utilizing untraceable cryptocurrency. Danniil Egorov, the head of the Russian Federal Taxation Service (FNS), highlighted worries in an interview about the harmful impact that cryptocurrencies may have on the national budget if they are not adequately managed. These decentralized crypto coins, according to Egorov, have the potential to cause “substantial erosion” of Russia’s tax base. The FNS is currently looking at measures to combat crypto tax evasion as well.

“If we talk about cryptocurrencies, we are now rather closely engaged in this sector, knowing that this method of calculations might cause a fairly big erosion for the tax base,” a tax official was cited as saying on Monday, November 22 in a story by Russian media RBC Group.

Egorov said it’s just a matter of time until the “untraceable” connection that makes the crypto space unique becomes traceable, revealing plans to install automated tracking systems to analyze large data quantities.

“Of course, technologies are utilised, and anonymisation is exploited in the provision of services by various scammers. Even when you go into the digital realm, you leave a trace. And it’ll only be a matter of time until this trail is discovered,” said the FNS officer.

Cryptocurrencies, which are still untraceable in nature, are decentralized digital finance systems in which records are kept using encryption rather than a bank or physical middleman.

Cryptocurrencies were proclaimed “authorised” in Russia on January 1, 2021, but not for the purpose of exchanging goods and services.

Cryptocurrencies can be mined, traded, and held by Russians, but using them as a payment method might land them in jail, according to a Forbes article.

While the Russian government has expressed interest in developing its own controlled digital currency, it is illegal to possess unregistered cryptocurrencies worth between $1,300 (approximately Rs. 97,500) and $13,000 (about Rs. 9.7 lakhs) in the country.

Regulating Cryptocurrency Around the World In addition to Russia, other countries are looking into methods to include cryptocurrency into their taxation systems.

For example, in India, the federal finance ministry has organized a special committee to investigate whether cryptocurrency trading profits should be taxed.

President Joe Biden of the United States approved a new bill earlier this month that contains tax reporting obligations for cryptocurrencies.

In the meantime, the cryptocurrency industry is exploding throughout the world. According to CoinMarketCap, the worldwide crypto market capitalization is currently about $2.9 trillion (around Rs. 2,15,66,720 crore).

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