How Bitfinex’s Tax Requirement May Have Contributed to the Bitcoin Price Correction

On May 17, one of the world’s largest cryptocurrency and bitcoin exchange Bitfinex officially asked its users to submit tax IDs and social security numbers that could be utilized by government agencies in the countries its users are based into tax gains recorded in the cryptocurrency market.

“We request that you complete the appropriate self-certification form and upload it to your Bitfinex account by May 24, 2018, at the latest. If you are a US person or an entity with at least one 25 percent owner who is a US person, please complete the appropriate FATCA form. You are required to provide us with such information,” said Bitfinex.

Targeted Users
Whalepool, a community of day traders focused mainly on bitcoin and other cryptocurrencies on Bitfinex, emphasized that they strongly disavow the decision of Bitfinex and have withdrawn their funds from the exchange.

“Bitfinex is now requiring users to give their tax information so that it can send it to BVI which will exchange it with your country’s tax authorities. We strongly disavow. If you also disagree with this decision, peacefully protest it by withdrawing your money from Bitfinex,” the Whalepool team said.

In response to the statement of Whalepool, the Bitfinex team noted that it has “deliberately targeted users” that it believes have an obligation to self-disclose and emphasized that only a portion of the Bitfinex user base was asked to disclose their tax identification and personal information.

In some regions like the US and France, capital gains tax on cryptocurrency investment is quite substantial. Until this month, the gains tax imposed on cryptocurrency trading was 45 percent, which was decreased to 19 percent by France’s Council of State because investors were not willing to disclose their earnings just to be taxed 45 percent.

In consideration of the high capital gains tax imposed on cryptocurrency trading, it is understandable that investors in the global cryptocurrency market try to avoid disclosing their tax IDs and prevent from being forced to pay abnormally large taxes on trades.