Brace for the Crypto Tax Storm: Blockpit CEO Florian Wimmer on the Global Crackdown

Based on the interview between Sergiu Hamza and Florian Wimmer on the October 7, 2024

Florian Wimmer sits poised in his Amsterdam hotel room, a serene oasis amidst the city’s bustling canals and cobblestone streets. “I’m here for the BTC Amsterdam Conference,” Florian mentions, settling comfortably into his chair. As the CEO of Blockpit, a leading crypto tax compliance software company operating in nine European markets and the US, Florian is at the forefront of navigating crypto taxation’s intricate and often convoluted landscape.

The Patchwork of Crypto Taxation in Europe

“People think Europe might have a standardized or harmonized way of dealing with crypto taxes,” Florian begins, lending a certain gravitas to his words. “But if you look at the map, you’ll see nothing but that. It’s a spectrum ranging from 0% to 55% taxation, and you can find almost any number in between.”

He isn’t exaggerating. The European crypto tax landscape is a mosaic of different approaches, each country wielding its own set of rules and rates. “It’s random,” he says, shaking his head slightly. “These [tax] systems developed within different governments over many years. Someone adds this, another adds that, and suddenly you have this incredibly complex system that’s hard to change.”

Zero-Tax Havens and the Illusion of Freedom

Florian touches on the allure of zero-tax countries, places like the United Arab Emirates, and certain jurisdictions like Hong Kong. “Countries like the UAE want to attract capital at the moment, so they make it very attractive for people to open up there,” he explains. “But you have to find a sweet spot between a low tax rate and a country that is regulated and compliant, where you can also get your money out and minimize the risk of getting scammed.”

He warns against moving to these so-called tax havens without fully understanding the implications. “It’s not just about moving to Hong Kong and paying no taxes. You need a bank account, you need residency, and you don’t want to get screwed over. Those tax havens are nice, but you might not be able to get the money from there into Europe or another country.”

The High-Tax Reality and Encouraging Long-Term Investment

Turning to countries with higher tax rates, Florian notes an interesting trend. “Countries like Germany and Belgium have zero tax for long-term holdings but are quite high on short-term gains,” he says. “They want to encourage wealth building, so people are rewarded for saving, not speculating.”

It’s a calculated approach. “If you hold your assets for more than one year, it’s considered more like saving, and you get rewarded. But if you speculate, you pay high taxes,” he elaborates. This strategy aims to stabilize markets by incentivizing long-term investment over short-term trading.

Austria’s Unique Position and the Complexity of Compliance

As an Austrian native, Florian provides insight into his home country’s stance. “In Austria, as long as you don’t leave the crypto-ecosystem and only swap from crypto to crypto (including stablecoins), it’s tax-free. You will need to pay taxes once you sell your assets for  Euros, for example,” he explains. “That makes a big difference. Our data shows that staking and lending have increased drastically over the last few years. People are doing that because every exchange now offers some kind of interest or staking mechanism.

However, he cautions that judging a country’s tax attractiveness is not easy based solely on numbers. “It’s really about what triggers a taxable event,” he says. “We have buying and selling, but in crypto, we have many other transaction types—airdrops, staking, lending, liquidity providing etc. Those need to be considered as well.”

The Looming Shadow of CARF and Increased Enforcement

The conversation shifts to the upcoming implementation of the Crypto-Asset Reporting Framework (CARF), an OECD initiative aimed at increasing transparency and facilitating the exchange of crypto-asset information between tax authorities.

“It’s going to be impactful,” Florian asserts, his expression turning serious. “Some crypto traders are hardcore libertarians by nature. They question the whole taxation system, but most still don’t want to leave their home country and the potential benefits. With the upcoming framework, this stance might result in serious trouble. We’ve already seen exchanges handing over data to authorities after getting requested through court orders. Now, they’re automating this, and that’s CARF.”

He predicts a seismic shift in compliance rates. “We estimate the global crypto tax compliance rate to be below 2% of crypto investors and traders submitting a tax declaration,” he says. “With strict enforcement, this number is expected to rise dramatically. There will be hefty fines; there might be jail time involved, depending on the size and magnitude of the offense.”

Florian underscores the global reach of this initiative. “Most countries—all the major ones—have already opted into this: 48 countries, including the US, Canada, South Korea, Japan and all European countries have pledged to comply. They will exchange the transaction and KYC data they receive from exchanges, brokerages, custodians, and other crypto asset service providers. So, this also impacts our business substantially because people will suddenly wake up to a letter from their financial ministry saying, ‘Hey, we know you hold crypto on platforms X and Z and incurred taxable crypto gains. We hope you are not forgetting to report them.’

The Future of Crypto Tax Compliance

For Blockpit, this shift represents both a challenge and an opportunity. “It’s going to be a hassle for people to declare late,” Florian acknowledges. “A lot of the data is not available anymore. Exchanges have closed down, but the blockchain doesn’t forget.”

He believes that increased enforcement will drive the demand for compliance solutions. “People will need tools to help them accurately report their crypto taxes,” he says. “That’s where we come in.”

The American Conundrum and European Contrast

Florian and I discussed next the differences between the U.S. and Europe regarding crypto taxation. “The U.S. is the biggest market in crypto,” he states. “But their level of taxation is variable, depending on the state where you are [residing]. There’s no small number.”

He contrasts this with Europe. “In Europe, every country is independent, and we love regulation,” he says. “Licensed service providers know what they have to do. They have a relationship with the regulator. They know what to expect, how to comply, and bet that this will be a source of prosperity in a growing market in the long term.”

The Scandinavian Frontier and Blockpit’s Expansion Plans

Looking ahead, Florian reveals Blockpit’s expansion plans. “We’re active in nine major European markets right now,” he says. “The larger countries are the more interesting ones — Germany, the UK, Spain, and Italy- just from a size perspective.”

He points to Scandinavia as a new frontier. “We have Western and Central Europe covered, but we’re still missing those in the north—Norway, Sweden, Finland, Denmark—which have clear tax laws, higher rates, and a good percentage of crypto adoption,” he explains. “Those are markets we have our eye on.”

Education as the Equalizer

As the interview winds down, Florian touches on a theme that resonates deeply with him: the importance of education. “I think you can only equal the playing field if you get the topic of education fixed first,” he says passionately. “We’re not there on the education level yet for people to understand finances, wealth management, savings, investing, and, of course, taxes.”

He believes education can help mitigate the harsh realities of increased regulation and enforcement. “With crypto, anybody with internet access can get involved,” he says. “But people need to understand what they’re getting into. They should be aware of the tax implications and the legal outlines.”

A Calm Before the Storm

In the serene Amsterdam hotel room, Florian reflects on the path ahead. “It’s going to be hectic,” he admits. “The first quarter after CARF goes live is going to be a mess with all these changes coming into effect.”

But he remains optimistic. “It’s necessary,” he insists. “Regulation should, in theory, protect the investor. Europe is at the forefront of regulation, and that’s what makes Europe an interesting partner for all the other countries. Everybody wants to do business in Europe because it’s regulated, compliant, and you can’t get scammed that easily.”

As we concluded our conversation, it was clear that Florian is a man navigating the crossroads of innovation and regulation with a steady hand. 

“At the end of the day, it’s about building trust,” he says. “[Build] trust with regulators, trust with consumers, and trust in the technology itself. That’s the only way forward.”