Andersen LLPCrypto & Digital AssetsDion Seymour comments on the Ethereum ‘Merge’ in UKTN

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16 Sep 2022

Dion Seymour comments on the Ethereum ‘Merge’ in UKTN

Crypto & Digital Assets Technical Director, Dion Seymour, comments on the environmental and tax implications of the Ethereum ‘Merge’, in UKTN.

Dion’s comments were published in UKTN, 16 September 2022, and can be found here.

“The merge has been long in development going back to 2016. The Ethereum Mainnet will now use a different consensus method than Bitcoin called Proof of Stake (PoS) rather than Proof of Work (PoW). The main outcome is that Ether will no longer need miners with their expensive and energy-hungry computers in the same way that Bitcoin does.

“The environment, quite rightly, is the main headline. The energy usage of Bitcoin exceeds that of many countries, and the merge could be an important step to lessening the carbon footprint of Bitcoin. It is important to note that this is a more finely balanced topic than it may first appear, but it cannot be ignored that PoS uses significantly less energy than PoW. Only time will tell if this will convince policy makers and other stakeholders that all cryptoassets are not created equally.

“It may also be lost on many that the merge comes with tax implications. From an international tax perspective, for some, this event may have an income tax charge that will need to be included in tax returns. In the UK, there are a number of differing possible outcomes with the tax consequences being far from straightforward for those that do not fully understand the UK’s tax regimes.”
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