Taxman makes first ever seizure of NFTs

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According to Knight Frank’s upcoming annual wealth report, NFT Art sales rose to $ 25 billion (£ 18.4 billion) last year. This is one-third of the world art market.

Andrew Shirley of Knight Frank said the growth of the NFT market is due not only to the number of high sales, but also to the “millions” of small transactions that day traders and fans are making online.

Estimates indicate that the entire digital ownership certificate market is over $ 40 billion, but experts warn that NFTs and other crypto assets are opening new frontiers for tax evasion and money laundering. increase.

NFTs are a type of crypto asset stored in an online ledger that proves that a token is unique. Given the evidence of large-scale transactions beyond the reach of traditional financial systems, we may face increased government scrutiny. Earlier this month, the US Treasury warned that the NFT market was vulnerable to money laundering.

NFTs are usually paid using digital currencies such as Bitcoin and Ethereum. These currencies surged in value during the pandemic as investors demanded higher returns in the new asset class due to solid interest rates.

Chris Etherington, a tax partner at accounting firm RSM, said:

“In common cryptocurrencies and blockchain, there was a historical link to criminal activity. [and] Money laundering. “

He said HMRC has a “huge award” by curbing tax evasion and trying to close the tax gap, which is the difference between income received by tax collectors and unpaid income.

Etherington added: “Perhaps 2020 was the year when cryptocurrencies exploded again from very small quantities, and there was a significant increase in certain coins … the same thing happened with last year’s NFTs.”

The government has called for more scrutiny of the crypto market in recent years after the boom has boosted stampede for general investors. It is estimated that 2.3 million people in the UK own crypto assets.

Last month, the Treasury moved to crack down on misleading cryptocurrency ads by meeting the same regulations as other financial promotions such as stocks. He launched the Cryptocurrency Task Force in 2018 to support regulatory efforts, claiming that he “is eager to support innovation” in this area.

HMRC also issues “Nudge” letters to crypto investors to ensure they are paying the appropriate taxes.

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