Albania is set to introduce new digital currency regulations focusing on taxation. According to a report by local news outlet Exit News, the proposed law spells out what constitutes income from digital currencies and how to tax them.
Per the report, the draft law is still at the public consultation stage but is intended to come into force by 2023. The draft law defines digital currencies and block reward mining for the first time in the country.
Digital currencies are “a digital representation of a value that can be deposited, traded or transferred in digital form, and that can be used for payment or investment purposes or as a medium of exchange, including but not limited to cryptocurrencies,” the law states.
It clarifies that the definition does not refer to central bank digital currencies (CBDCs), which the country has not shared any plans to explore. Similarly, the draft refers to block reward mining as “the activity of using the computer power of system users to solve cryptographic algorithms, to confirm transactions and gain virtual tools in exchange.
Based on the definitions, the draft proposes to tax any income derived from business transactions involving digital assets or block reward mining. Different tax rates are also proposed that will depend on the type and size of income. Individuals will reportedly be subject to an investment income tax of 15%, except for dividends.
Albania moving on with digital currency regulations despite criticisms
The draft law is not the only recent move the Balkan country is making toward regulating digital currencies. Earlier this month, Albania’s main financial regulator, the Financial Supervisory Authority (AFSA), was asked to approve regulatory acts on digital currencies within 2022 by a resolution from the parliament.
The parliamentary resolution also called for the AFSA to collaborate with international digital assets regulators. The parliament hopes to pass market regulations for digital currencies and other laws by the end of the year.
In 2020, the 2.8-million person nation made the news as the third European country to introduce comprehensive regulations for digital assets. The bill, “Financial markets based on distributed ledger technology,” outlined risk management requirements for virtual assets service providers (VASPs) in the country.
According to the proponent of the bill, Finance and Economy Minister Anila Denaj, the bill was intended to harness the potential of distributed ledger technology. However, critics have said that it does not adequately prevent using digital assets for money laundering.
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