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Comment by iskander | Hacker News Reader

Whatever your opinions on generative art sold as NFTs, the lack of regulatory clarity seems pretty stifling.

The author asked for guidance:

>I called the VID (Latvian State Revenue Service) and asked in detail what I should do. I was told that I should first register as a self-employed person with the profession of an artist. And I have to convert my income into fiat and pay tax on the income in fiat because cryptocurrency is not money in Latvia.

...followed it by converting to Euros and paying taxes and then still had his bank account frozen for half a year without any further clarification on what he did wrong or how to fix it.

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It seems that the criminal complaint is related to money laundering (ie concealing the true source and/or beneficial owner of the funds) rather than tax evasion. If that is the case, then tax compliance is expected (as the point of money laundering is to produce a clean post-tax cash flow).

I have no opinion as to the legitimacy of the criminal accusations, but having correctly paid tax liabilities would not be a defence.

Right, it seems that they want a KYC list for everyone who bought his art, which isn't possible given the medium. Some announcement of that policy would be better than letting it become known through surprise enforcement.

> Right, it seems that they want a KYC list for everyone who bought his art, which isn't possible given the medium.

If that's true, then the medium does not appear to be a lawful method for transactions above €10,000 in the EU.

> Some announcement of that policy would be better than letting it become known through surprise enforcement.

AML 5 - the Directive which introduced this regulation - is not exactly a secret. Especially if transacting through a company, it is very difficult to argue ignorance as a defence to non-compliance.

Traditionally, dealers and auction houses would require and assist with KYC/AML compliance, which was part of the value they offered. Relying on non-compliant permissionless contracts does not absolve the vendor of their responsibilities.

I don't think the mint prices for any works by shvembldr have ever exceeded €10k. I looked up the mint price for The Blocks of Art and it was 0.1eth (maybe $300 at the time), the closest I could find was the high point of an auction for Alien Insects was 3eth (~$9k at the time).

In addition to primary sales, there are also royalty payments for secondary sales but I don't think any of his pieces have ever sold for €200k (which would be required for a €10k royalty).

...but maybe this goes against the spirit of AML-D5 since popular generative art still drives many millions of dollars/euros in sales, but often split across smaller transactions (since a collection may contain hundred to thousands of individual pieces).

It seems like he took it out of coinbase in a lump sum, which resulted in a single large inexplicable transaction.

A transfer between your own accounts is pretty straightforward to declare, it's you on both sides.

He could possibly sue for them forcing him to devalue his crypto. It is a security like stocks really. The fact that they recognize it has no relevancy unless he attempted to use it as currency in their country which it he did then they are mostly right it is taxable income and they had every right to demand payment in local currency and even force the payment. If he simply posessed crypto as income but relied on other fiat income or arrangement to make ends meet then I think he can contend their actions.

Point being, if you have income and you call it income then your government can tax you and they can demand payment in their local currency. Forget crypto, they can force you to convert dollars to euros as well.

As for NFTs I don't think they need regulation, a person sells another person the golden gate bridge as a concept, so long as they pay sales tax who cares. No false advertisement there.

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