It appears President Joe Biden has a tough stance on cryptocurrency taxation and regulation. He has proposed several measures to increase the tax burden on crypto miners, traders, and investors, as well as to close the loopholes that allow tax evasion and wash-trading.
Some of these measures include:
A 30% excise tax on the electricity cost of crypto mining, which would be phased in over three years starting from Dec. 31, 2023. This is aimed at addressing the environmental impact of crypto mining, which consumes more energy than some countries.
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Requirement to report crypto transfers of more than $10,000 to the IRS, which would help identify and track potential tax evaders and money launderers.
A new minimum tax of 25% on unrealized capital gains, which would apply to some high-net-worth crypto owners who hold their assets without selling them.
A wash sale rule for crypto assets, which would prevent traders from claiming tax-deductible losses on losses and then immediately repurchasing the same tokens. This would align crypto taxation with that of stocks and bonds.
These proposals are part of Biden’s budget plan for the 2024 fiscal year, which is expected to raise billions of dollars in revenue for the government. However, they have also faced criticism and opposition from some crypto enthusiasts, who argue that they will stifle innovation and growth in the industry and create unfair disadvantages for crypto users compared to other asset classes.
President Biden sometime last year signed an executive order on ensuring responsible development of digital assets, including cryptocurrencies. The order outlines the first ever, whole-of-government strategy to address the risks and harness the potential benefits of digital assets and their underlying technology.
The order lays out a national policy for digital assets across six key priorities: consumer and investor protection; financial stability; illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.
The executive order calls for measures to protect U.S. consumers, investors, and businesses from the implications of the growing digital asset sector and changes in financial markets. It also encourages regulators to ensure sufficient oversight and safeguard against any systemic financial risks posed by digital assets.
The order directs an unprecedented focus of coordinated action across all relevant U.S. government agencies to mitigate the illicit finance and national security risks posed by the illicit use of digital assets. The order also supports innovation and U.S. competitiveness in the global financial system by exploring a digital version of the dollar and engaging with international partners on global governance of digital assets.