The Spanish government recently put forward a new law that, if passed, would require Spanish citizens to report all of their cryptocurrency holdings to the Spanish government.
Now, reporting one’s crypto holdings may not be the worst thing in the world. Sure it’s time-consuming and expensive, but on the scale of potential government abuse, it’s definitely not the worst thing that could happen.
So why am I writing this article?
Because this law could also be the precursor to something far more nefarious. Something Insiders should be prepared for.
Spain is Broke
There’s no question as to why the Spanish government wants this law passed. They’re broke and they’re looking for any means they can to reduce their debt burden.
At 1.2 trillion euros, Spain’s debt to GDP ratio is just shy of 100%. Youth unemployment rates are at 34%, second worst in the EU behind Greece. The Spanish economy is weak and the government needs to act quickly if it wants to fend off an economic downturn.
Aware of the urgency of their financial situation, the Spanish government is desperately looking for new sources of revenue. Given all the publicity in recent years about cryptonaires and the vast fortunes made in crypto, it’s not surprising that the crypto industry has become a target for Spanish tax authorities.
While this wouldn’t be the first time a government has taxed crypto, what stands out about this new piece of legislation is that 1) it requires reporting of crypto holdings even if no taxes are owed and 2) the penalty for inaccurate reporting is extremely severe, with each inaccuracy resulting in a 5,000 euro penalty.
Nothing to Hide, Nothing to Fear
As I’ve talked about previously on the subject of data privacy, government databases are often misused and the first step toward government control or confiscation.
There’s a reason the National Rifle Association (NRA) doesn’t want the US government to maintain registries of all gun holders. If the US government decides to ban guns one day, it will be a lot easier for regulators to go around and collect “contraband” if they know exactly which doors to knock on (or break down).
Enter Spain’s new tax law.
For what reason is Spain collecting information on its citizens crypto holdings? Are tax authorities simply trying to prevent tax fraud? Or is there a more nefarious purpose, such as preparation for the “nationalization” of crypto?
Now I know what many of you might think, a civilized country like Spain would never “nationalize” (or steal depending on your vantage point) the crypto holdings of its citizens.
So let’s travel back to the US in 1933 and see how a civilized government acts when it’s broke and desperate.
On April 5, 1933, the US government issued an executive order that instantly forbade the “hoarding” of gold coin, bullion and certificates, and required every US citizen to hand over their gold holdings to the state.
Within a year, the US government confiscated over 4,000 tons of gold from the American people.
This confiscation came at the heart of the Great Depression, as the US government was desperate for additional resources to fund their “recovery” spending.
Now you might assume that US citizens were outraged by the new law. But you’d be mistaken. There were no protests. No marches. In fact, news of the law didn’t even make the front page of the New York Times the next day.
Given this historical precedent, it shouldn’t be hard to imagine a broke government, like Spain, seriously considering the nationalization of its citizens’ cryptocurrency.
What does this mean for Crypto Law Insiders?
The fact that Spanish officials are pushing for legislation like this is not a good sign. It indicates that the Spanish government is planning to get tougher as a means of shoring up its budget deficit, either with more draconian tax laws or potentially outright confiscation.
A broke government using its power to take people’s savings in non-government issued currency is a common historical theme.
It would be naive to think that asset confiscation, either in the form of “nationalization” or abusive tax rates, is not a possibility in Spain and elsewhere. Governments have a notorious record of fleecing their citizens, particularly in times of desperation.
Insiders should not expect governments to be fair. Nor should you expect your fellow citizens to care when your crypto is confiscated for their benefit. Ultimately your interests are yours alone. Be prepared.