Cryptographic Cards and Taxes: What You Need to Know!

Now all trading platforms offer a range of crypto cards – Visa or Mastercard bank cards. Usable like any credit card, they are linked to your cryptocurrency or euro accounts. Do you know they can generate taxes?

Cryptographic cards that can be used as bank cards

All trading platforms, such as Binance, Coinbase or Crypto.com, offer cards associated with your account. Most are Visa cards, they are often free and sometimes offer cashback. They can be used like “normal” bank cards and look so practical. However, they have a big disadvantage in France: they can be tax generatorsafter very complicated calculations for the user.

Funds in euros or funds in cryptocurrencies?

In the first case, if you use your euros, the ones you sent at the exchange and the ones you are going to spend, there will be no taxable event. Not even crypto cashback (for now). Many users use their card this way and earn some cryptocurrency every time they make a payment (often based on the number of platform-native tokens they hold).

On the other hand, if you use your cryptocurrency funds, it is not the same story: there is a crypto / fiat conversion. And the conversion generates a tax, since there was a capital gain. This is called the flat tax. This flat tax is quite complicated to calculate in this case: if in absolute terms the flat tax is based on the capital gain (30%), here it will be calculated as follows:

For each transaction, you must note the total value of your cryptocurrencies, the purchase price affected by the conversion, and the selling price of the assets at the time of the transaction.. All these elements allow you to fill in the form 2042-C.

If you have made a small (or large) profit on your bitcoins (BTC) and want to use it for shopping, it is desirable that you are very good at math.

The puzzle of calculating added value

For the moment there is an exemption threshold: 305 euros. 305 euros without headaches. Beyond this threshold, it seriously thickens. With a 30% tax on every crypto / fiat conversion, France has the heaviest tax in the world. Germany, for example, exempts its taxpayers from capital gains if the taxpayers have held their cryptocurrencies for a minimum of one year.

In short, if you want to use your crypto card to make daily purchases with your bitcoin (BTC) funds, you will have to use a very well configured software or go to a specialized company as the calculations are complicated. The French cryptosphere looks with envy on dynamic countries like Switzerland: some cantons accept the payment of taxes in bitcoin and Bitcoin Suisse facilitates the payment of daily purchases. The irony of the story is that Wordline, which partnered with Bitcoin Suisse, is a French company …

Nexo paper: an alternative to use in moderation

Link offers an alternative that has not yet been considered by the French tax authorities. Nexo offers a Mastercard to spend euros by putting your cryptocurrencies as collateral (as a pledge if you prefer). You will be able to use up to 80% of the value of your committed cryptocurrencies with a loan rate ranging from 0 to 13.9% in April. Since there is no Crypto / Fiat conversion, there is no taxation.

But there is a but necessarily. Nexo offers great returns, cashback and loans that sound great, but it is not a charity. In the event of a decrease in the value of your collateral, your loan will be liquidated (your resold cryptocurrencies). In bear market, not only will you have lost your cryptocurrencies, but you may also have a taxable capital gain. Some even say so Nexo would trade against its customers to liquidate their loans … Cryptocurrency lending can prove to be a dangerous game, customers of Centigrade will confirm it. Never forget that in a centralized exchange you entrust your private keys! In case of bankruptcy or scam exityou will have little chance of recovering your funds.

While many websites describe all the benefits of crypto cards and their ease of use, few explain that paying with crypto funds generates fees. The French taxpayer is therefore potentially liable for a tax without knowing it. Due to very complicated calculations of capital gains, you will be tempted not to declare anything (at your own risk) or to abandon this payment system. Too bad we do not have more flexible tax legislation: the reintegration of cryptocurrencies into the “real economy” can only be beneficial. Two years of health crisis and an inflation that is beginning to scare will not have made the government give in to reducing taxation in this sector. Some deputies, however, including Pierre Person, had presented an amendment to obtain a reduction of 3,000 euros on purchases made in cryptocurrencies, rejected (in a semi-empty hemicycle …)

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Mary Batshwok avatar
Mary Batshwok

Subprime, financial crises, runaway inflation, tax havens … Bitcoin was designed for greater transparency and perhaps to finally change the situation. I try to understand this new environment and try to explain it myself. The road is undoubtedly long, but it is worth it.

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