Over 90% of Crypto Investors Fail to Declare Income, EU Tax Observatory Reports

A recent episode of Cointelegraph's "Chain Reaction" series, titled "How the Crypto-Rich Don't Pay Tax (feat. The Bitcoin Accountant)," has brought renewed attention to the persistent challenges of cryptocurrency tax compliance. The episode, highlighted by a tweet from Cointelegraph, delves into strategies employed by wealthy crypto holders to legally minimize their tax liabilities on digital assets. This discussion comes as tax authorities globally grapple with the complexities of digital asset taxation.

The "Chain Reaction" discussion explores various legal avenues for tax avoidance, including strategies like tax-loss harvesting, which allows investors to offset capital gains with losses. Long-term holding of cryptocurrencies is also a key method, as assets held for over a year often qualify for lower long-term capital gains tax rates. Additionally, the episode touches upon the utilization of crypto-friendly jurisdictions, where regulations may offer more favorable tax environments for digital asset investors.

Despite efforts to enhance transparency, a March 2025 working paper from the EU Tax Observatory revealed a significant challenge: "over 90% of crypto investors do not declare crypto income." This high rate of non-compliance underscores the difficulty tax authorities face in monitoring a decentralized and borderless asset class. The study also noted a "significant and persistent evasion response" where investors shift trading activity from domestic platforms, subject to reporting, to foreign platforms outside regulatory reach.

In response to these challenges, regulatory frameworks are evolving. The United States, for instance, implemented a new requirement as of January 1, 2025, mandating that all crypto sale transactions must be reported to the IRS. Similarly, the European Union's Markets in Crypto-Assets (MiCA) Regulation sees its second part come into full effect on December 30, 2024, introducing requirements for Crypto-Asset Service Provider (CASP) licensing and market abuse prevention. International initiatives like the OECD's Crypto-Asset Reporting Framework (CARF) and the EU's DAC8 are also set to establish standardized international reporting obligations for crypto-asset transactions from 2026, aiming to close global regulatory gaps.

Specialized professionals, often referred to as "Bitcoin Accountants" or crypto accountants, play a crucial role in navigating this intricate landscape. They assist investors in understanding and complying with evolving tax laws, ensuring accurate reporting of gains and losses, and identifying legitimate tax-saving opportunities. Their expertise is becoming increasingly vital as authorities intensify efforts to integrate digital assets into traditional tax systems and combat non-compliance on a global scale.