Romania and Latvia are among the latest European countries to launch analytical work on updating their respective regulations for the cryptoasset and blockchain industry. In Romania’s case, this could potentially mean increasing national taxes on crypto-related operations and transactions. In Latvia, the government aims to intensify its anti-money laundering (AML) efforts.
Representatives of the Romanian and Latvian Ministries of Finance told that the next regulatory steps to be taken at the national level will largely depend on the outcome of the ongoing discussions within the European Union of which both countries are member states.
A spokesperson for the Romanian Ministry of Finance said that the ministry is fully aware of the relevance of cryptoassets for the country’s fiscal system. At the same time, the government finds it is necessary to update the country’s tax regime.
“Having in view the dynamics and the challenges of this sector, the present [regulatory] framework needs revising and updating both from the point of view of fiscality and from the perspective of providing a definition for crypto assets,” the Ministry representative said.
To this end, they said, “specialists” within the Ministry are actively following the taxonomy implemented in other countries, taking part — internally and within the international institutions — in activities and the process of “analysis and identification of solutions for the implementation of the market of cryptocurrencies,” according to the spokesperson.
Potential higher Romanian taxes on crypto
Updating Romanian fiscal rules, also with regards to cryptoassets, is on the government agenda, and it was communicated to the EU via the country’s National Plan for Recovery and Resilience, a document that outlines Romania’s strategy of jumpstarting its economy following the outbreak of the COVID-19 pandemic, the representative said. To support the economies of its member states, the 27-member bloc is making available EUR 723.8bn (USD 807.5bn) worth of loans and grants.
Among the “objectives of the component of fiscal reformation” that was assumed by the Romanian Government in the above-mentioned plan and approved by the European Parliament, is revising the fiscal framework which aims to align the taxation system to the present and future stage of economic development of Romania, the spokesperson said, adding:
“This is to be achieved through improving “the structure of fiscal revenues as well as the elimination of distortions and failures in the fiscal system.”
The above suggests that Romania’s government finds it is necessary to revise the country’s fiscal framework to improve the structure of its tax revenues, also generating more tax revenues from crypto-focused operations, among others.
Latvia looks to EU for crypto regulations update
Meanwhile, in Latvia, the country’s Ministry of Finance is looking to enhance the overall virtual asset service provider (VASP) “supervisory framework.”
According to Aleksis Jarockis, Director of the ministry’s Communication Department, they plan to do so by:
- strengthening analytical functions
- expanding the amount of information available for supervisors and other authorities
- introducing improvements and strengthening monitoring and control tools, according to the identified level of risk
Jarockis said that the Latvian State Revenue Service (SRS) supervises virtual currency exchange service providers, as well as all VASPs. Therefore, the scope of supervision comprises all providers of virtual currency services, including digital wallet service providers. Furthermore, the SRS has identified seven VASPs that provide or are in process of providing services to Latvian residents in Latvia, according to the ministry official.
“Considering that the Latvian market is relatively small, as well as the fact that VASPs are not subject to licensing (only registration), VASPs in Latvia are not widespread. Non-licensing may restrict the ability and rights to provide cross-border services,” Jarockis said, adding that “the overall interest in crypto operations is growing” in the Latvian market.
The director emphasized that Latvia’s potential legislative plans will be closely related to the direction in which the EU takes its AML and combating the financing of terrorism (CFT) regulations.
Jarockis said argued that work at the international level suggests that there is a need to expand the scope of sectors/entities covered by the EU AML/CFT rules, as well as to assess how these rules should apply to VASPs not covered so far.
“Hence, further legislative and practical actions in regard to Latvia’s national VASP regime will be decided more specifically on the basis of the proposal for the EU level AML regulation/directive discussed in the European Council, and [among others] accounting for factors of cross-jurisdictional activity and the EU single market,” the official said.