Her Majesty’s Revenue and Customs (HMRC) seized three NFTs worth millions.
UK tax authorities track down scammers
HMRC seized three NFTs that are presumed to be connected to VAT fraud. The agency announced that it was the first in the UK to seize an NFT and that three persons had been detained in a fraud case that could involve up to 250 fake firms. The NFTs in question are worth well over $2.5 million AUD. HMRC also confiscated almost $9,000 worth of crypto and three unvalued NFTs.
Nick Sharp, the agency’s deputy director of economic crime, said the seizure served as a warning to anyone thinking they could use crypto to hide money. He also said:
“We constantly adapt to new technology to ensure we keep pace with how criminals and evaders look to conceal their assets.”
The case follows a much more high-profile seizure by the United States DoJ, which confiscated Bitcoin connected to the 2016 Bitfinex hack. The loot is now worth more than $5 billion AUD, enough for streaming behemoth Netflix to plan a documentary series about the case.
Investors not particularly educated about crypto
Although crypto is still widely seen as a “safe” method of tax evasion and hiding money you don’t want the government to find, there’s reason to believe the average investor isn’t any more intelligent than prosecutors. According to a survey, 20% of crypto investors in the UK confess they have poor knowledge of cryptocurrencies. As such, tax authorities are probably much less behind average investors when it comes to crypto expertise.
Easy tax evasion with crypto is a fallacy
Furthermore, it doesn’t take tax authorities much to clamp down on entry points into the crypto world: centralised exchanges.
Crypto is still heavily dependent on centralised exchanges to onboard users to the space. Most of these exchanges nowadays have KYC regulations, meaning your identity can easily be shared with tax authorities if the law requires it. Although the same cannot be said for NFTs, which are mostly traded on decentralised exchanges, the HMRC seizure shows that governments do, in fact, possess the tools to track crypto fraud. They may just lack the manpower to do so.
But how does that help investors?
Fair enough, you might say, but why doesn’t the taxman protect me then from rug pulls?
This is an issue the crypto space will have to figure out over the following years if mainstream adoption is truly to happen. For older generations, who are less risk and tech-affine, to be onboarded, cryptocurrencies will have to strike a balance between security and convenience. At the moment, they are lacking both.
Try explaining to your grandmother that you lost your internet coins – that you never actually had in your hand – to a “smart contract hack” by an anonymous user. This is the type of interaction crypto firms and protocols should be working on with regulators so that everyone can enjoy a safer version of the technological revolution that is cryptocurrencies.
