Tax Bitcoin, says ECB executive

Crypto assets should be taxed, especially if they have a high carbon footprint, according to a top official at the European Central Bank.

Fabio Panetta, one of the ECB's six executive board members, will issue the call Monday in a few hours at Columbia University in New York in a speech that the central bank published ahead of time.

“Currently the tax treatment of crypto-assets is minimal: We know very little about who really owns them, and about the size and the distribution of the capital gains,” his speech reads.

Taxes should be even higher for those cryptos that run on blockchain technologies known as Proof-of-Work, which require specialized computers that consume a lot of energy to process and record transactions. The most famous example is Bitcoin.

“Negative externalities that lead to sunk costs for society, such as high pollution, could be factored into appropriate taxes levied on participants in crypto markets,” according to the text — which is littered with references to the American Wild West and even a character in the popular TV series "Game of Thrones."

Tax is one of four policy points that Panetta will highlight in his call to policymakers to crack down on an industry he says thrives off speculation and could lead to financial instability if left unattended.

The other three areas are dirty money safeguards, regulatory reporting duties and transparency requirements.

EU legislators are close to agreeing on new rules for these three fields for so-called stablecoins, which are digital assets tied to a national currency or a basket of financial products. But most of these measures stop short when it comes to “unbacked” crypto assets, whose value is determined by investor appetite.

“Europe's regulatory measures need to go further,” Panetta said. “We need to focus more on unbacked crypto-asset activities that are undertaken without service providers.”