Data from the Danish Tax Agency reveals a concerning trend among crypto traders in the country. A recent study conducted by Hjalte Fejerskov Boas and Mona Barake, published by the EU Tax Observatory, found that over 90% of Danish investors who sold digital assets in 2021 did not report any crypto income on their tax returns. This high rate of noncompliance has persisted despite Denmark’s efforts to enforce reporting rules, including a mandate in 2019 that required domestic exchanges to share transaction data with tax authorities.
The researchers analyzed trading data from Denmark’s regulated crypto exchanges, tax filings, and cross-border bank transfer records to uncover the extent of nonreporting among crypto traders. They discovered that noncompliance was widespread across all wealth brackets, ranging from 95% among investors in the bottom decile to 86% in the top decile. This indicates that crypto tax evasion is not limited to the wealthy, with traders of all income levels failing to report their gains or losses.
In response to the persistent problem of nonreporting, many Danish traders have opted to move their trading activity to foreign exchanges in an attempt to evade reporting rules. Bank transfer records show a notable and sustained migration from domestic to foreign exchanges following the implementation of the reporting requirement. This trend mirrors similar findings in other countries, such as Norway and the United States, where a significant percentage of crypto traders also failed to report their gains.
To address the issue of widespread underreporting, policymakers are working towards implementing coordinated global reporting standards. Initiatives such as the OECD’s Crypto-Asset Reporting Framework and the EU’s DAC8 will require crypto platforms worldwide to share transaction data with tax authorities starting in 2026. However, critics warn that the effectiveness of these measures hinges on universal participation, as decentralized trading and noncooperative jurisdictions could continue to undermine enforcement efforts.
In addition to global initiatives, Denmark is considering implementing tougher measures domestically. The Danish Ministry of Taxation has proposed a 42% tax on unrealized gains from cryptocurrencies acquired since Bitcoin’s inception in January 2009. Tax Minister Rasmus Stoklund argues that this new tax rule would simplify how crypto gains are taxed and address the perceived unfair treatment of crypto investors under the current capital gains regime.
Overall, the findings from the Danish Tax Agency’s study underscore the challenges of enforcing tax compliance in the rapidly evolving world of cryptocurrency trading. As governments around the world grapple with the issue of crypto tax evasion, coordinated global efforts and robust regulatory measures will be crucial in leveling the playing field for all investors.