Lawmaker warns stablecoin payouts could spur tax evasion

A lawmaker warned in a recent statement that government payments made in stablecoins could create a “tax-evasion economy” by enabling anonymous, unreported transactions that bypass tax authorities and financial controls.

The concern was raised in response to proposals to deliver government benefits and other public transfers using digital tokens pegged to fiat currencies. The official warned that if recipients receive stablecoins in private wallets, tokens can move peer-to-peer without the identity checks and reporting that banks and payment processors now provide.

Stablecoins are cryptoassets designed to hold stable value through backing with cash, securities or other assets, or via algorithmic mechanisms. Proponents say stablecoins can speed up payments, lower costs and reach people without bank accounts. The lawmaker acknowledged these potential benefits while stressing that many stablecoin designs and the wider crypto ecosystem lack the transaction records tax authorities use to monitor income.

The lawmaker identified specific features that could undermine tax reporting: wallets controlled directly by individuals rather than regulated intermediaries; the ability to transfer tokens off established platforms; and tools that obscure the origin or destination of funds. Mixing services and privacy‑enhancing tools were cited as making tracing transfers difficult for investigators.

To address those risks, the lawmaker called for rules requiring traceability and reporting for any public‑sector stablecoin payouts. Proposed safeguards included routing disbursements through regulated custodians that perform know‑your‑customer checks, requiring automated reporting of transfers to tax authorities, limiting convertibility options for government‑issued tokens, and keeping detailed, auditable records of distributions. The official also recommended considering central bank digital currencies as an alternative, noting they can be structured with identity and reporting features.

Tax authorities and financial regulators in multiple jurisdictions are reviewing how existing anti‑money‑laundering and tax rules apply to cryptocurrencies, including stablecoins. Regulators are weighing whether to extend AML and tax‑reporting obligations to crypto firms, require identity checks on wallets used for regulated transactions, or mandate on‑chain reporting tools.

The lawmaker urged lawmakers and regulators to set clear rules before any large‑scale use of stablecoins for public payments. Governments worldwide are experimenting with digital payment technologies and debating how to incorporate cryptoassets into public finance, while distinguishing privately issued stablecoins from central bank digital currencies, which would be issued and controlled by monetary authorities.