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Decoding the crypto tax conundrum

PhD student Yayan Riyanto is investigating cryptocurrency regulation.

The global pandemic caused a seismic shift in how we work, live and connect.

With millions of people confined to their homes, online activities surged, and one industry emerged an unexpected winner: cryptocurrency investment.

“Cryptocurrency capitalisation reached a record high of USD 3 trillion in 2021,” Monash Business School PhD student Yayan Riyanto, who is with Monash Business School's Department of Business Law and Taxation, said.

“People were spending so much time online, and new investment opportunities were teeming with crypto start-ups rolling out aggressive customer acquisition efforts.”

However, when technology races ahead, regulations often lag behind.

“I was reading an OECD report on taxing virtual currencies and realised there had been very little exploration into the implications of tax evasion,” he said.

“This gave me the impetus to investigate tax compliance behaviour in the crypto-assets environment.

Challenge of regulating an exciting new field

“It’s an exciting field because crypto is an intersection of many things – it’s a fusion of ideology, technology and economy.”

Mr Riyanto said governments were still grappling with fragmented regulations, pseudo-anonymous transactions, and the evolving complexities of cryptocurrency usage.

“It’s a delicate policy choice for governments that will, in the worst-case scenario, result in the loss of both revenue and the opportunity for economic growth that comes with technologically innovative industries,” he said.

He said his research would confirm if crypto’s reputation for sheltering tax evasion was warranted and provide solutions for policymakers to address the issue.

“The primary goal is twofold: one, to assist governments in better designing and balancing policies to both optimising revenues and creating a supporting climate for innovation and growth from this sector; and two, to further theoretical understanding of tax compliance behaviour that emphasises certain asset classes,” he said.

The research gathers insights from three key players – tax authorities, crypto intermediaries, and taxpayers – using lab experiments and case studies to illuminate the findings.

“I examine data from two jurisdictions with vastly contrasting policy responses: Indonesia, which has just introduced taxation for crypto-assets in 2022, and Australia, which has nine years’ experience in taxing crypto-assets,” he said.

Much-needed “practical insights”

Professor John Bevacqua said Mr Riyanto’s research would bring together the disparate but emerging literature dealing with the tax implications of crypto asset transactions.

“In particular, Yayan’s work will provide practical insights into tax compliance implications of the growing trade in crypto assets,” he said.

“This issue is important and timely as tax administrations, taxpayers and crypto asset trading platforms grapple with the uncertainties, challenges and opportunities presented by crypto assets.”

Mr Riyanto said he was excited by the opportunity to drive change and innovation.

“In the future, I plan to go back to my home country, Indonesia, and work for the tax authority there, suggesting and implementing all the findings I have gathered from my study to hopefully have an impact,” he said.

“What motivates me is the chance to be an expert in this field and challenge myself to create real change in the world.”