Laos Warns Crypto Companies Owing Taxes
- Laos turned to crypto to increase its revenue following a tough economic year.
- Laos introduced crypto-focused policies in 2021 but the country’s regulatory framework remains unstable.
Southeast Asian country Laos claims crypto operators owe $20 million in licensing fees and taxes. Laos recently turned its attention to the budding digital asset sector as part of its efforts to increase its revenue.
However, the country’s military claims that most crypto service providers have failed in their financial obligations to the nation. Laos previously authorized 15 crypto operators to carry out mining and crypto exchange activities.
Sonexay Siphandone, the prime minister of Laos, warned that companies defaulting on their payments could face heavy penalties and even lose their operating licenses.
Laos, like most countries, faced severe economic struggles this year, worsened by a severe drought that lasted from January to June. The situation proved costly for the Asian nation, resulting in numerous deaths and driving a state-owned energy distribution company to halt the supply of electricity to the nation’s cryptocurrency mining facilities.
Following the tough times, Laos sought newer ways to improve its economy and turned to the crypto industry. Laos previously announced plans to use digital technology to increase foreign exchange reserves, boost tax income, control inflation, and promote long-term economic growth.
Laos began adopting crypto laws in November 2021 to formally recognize and promote cryptocurrency mining and trading. The action was perceived as an attempt to fill a void created by China’s prohibition on cryptocurrency mining.
The regulations, released by Boviengkham Vongdara, Minister of Technology and Communications, required cryptocurrency companies to be fully Lao-owned, financially secure, and deposit a $5 million security with the Bank of Laos, the country’s national bank.
The regulatory structure also provided incentives for the use of electricity in cryptocurrency mining, establishing a minimum requirement of 10 megawatts to be supplied by a local energy distribution company under a six-year renewable contract. However, a recent report by crypto-analytic firm Elliptic claims Laos’s digital regulations remain unstable.
The report notes that regulations in the Asian nation are not considered final as they exist on a “ministerial level”. In addition, Elliptic claims that both the government and firms do not understand the risks posed by virtual assets and do not have sufficient structure to prevent the use of digital assets for crimes like money laundering.
Despite the loopholes in its regulatory framework, Laos is making slow but steady progress in developing its blockchain ecosystem. Most Asian countries have either completely banned the industry or have failed to regulate it.