May 17 was the day, when Bitfinex, one of the world’s largest cryptocurrency and bitcoin exchange officially announced for its users to submit their tax IDs and social security numbers declaring that it may be utilised by government agencies in the countries its users are based.
Below is the notification issued by Bitfinex:
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.
Whalepool, a known community of day traders particularly for Bitcoin and other cryptocurrencies on Bitfinex expressed its extreme displeasure regarding the notification and they withdrew their funds from the exchange.
Statement issued by Bitfinex reads
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.
Bitfinex’s move was well justified by its team saying it is an intended move for targeting those users that it believes have an obligation to self disclose. It was emphasised that the decision is going to affect only a portion of Bitfinex user base who fall into the category of having an obligation of self disclosure.
It is worth mentioning that capital gains on cryptocurrency investment is really substantial particularly in some regions like the US and France. The tax imposed on cryptocurrency trading was 45% which had been decreased to 19% by France’s Council of State because 45% tax on cryptocurrency trading lead to unwillingness of disclosing earnings by the investors. With the high capital gains tax been imposed on cryptocurrency, the investors in the cryptocurrency market remain reluctant to disclose disclose their tax TDS and save themselves from paying large amount of taxes on trades.
The investor who trade the bitcoin-to-USD, they form the majority of investors in the market, they embarked on selling and withdrawing their funds out of Bitfinex the decision of Bitfinex.
Bitfinex is the biggest bitcoin-to-USD exchange dominating over more than 29% of market share.
A Drop In Bitcoin Price
Post Bitfinex’s move regarding tax information submission the bitcoin price saw a fall in the price reaching down to two months low at $7925. There is a strong likelihood that price drop of bitcoin was the result of Bitfinex’s announcement and consequent sell-off by investors.
The cryptocurrency market is highly volatile. There is a drop in the daily trading volume of the cryptocurrency market of $5 billion from $21 billion to $16 billion. It is expected that bitcoin price will rebound soon as the market has shown good signs of recovery.