Crypto Community Responds to Proposed Crypto Tax Reporting Rules Under Biden Administration

On August 25th, in an effort to curtail tax evasion within the crypto sphere, the Internal Revenue Service (IRS) unveiled plans for brokers to adhere to fresh rules governing the sale and trade of digital assets. These regulations would require brokers to use a novel form to streamline tax filing processes and mitigate potential tax fraud.

The Treasury Department’s rationale behind these proposed rules is to align the reporting of digital assets with the reporting norms of other asset classes.

Nonetheless, a considerable portion of the crypto community remains apprehensive that these stringent regulations could inadvertently push the crypto industry further away from the United States.

Among the dissenting voices, Ryan Selkis, the CEO of Messari, expressed his concerns, hinting that if Biden’s administration secures a second term, the crypto industry might not thrive within the country. Similarly, Chris Perkins, the President of CoinFund, posited that other nations have surged ahead of the U.S. in terms of crypto innovation. In his view, the imposition of these rules could stifle the inflow of innovation into the country, suggesting that straightforward and detailed regulations allowing safe innovation are preferable to harsh crackdowns.

Contrarily, some skeptics believe that neither the Democrats nor the Republicans are likely to champion crypto interests effectively within the U.S. One user expressed doubts about either party’s stance on crypto, noting that the situation seems less favorable now than during the previous administration. The introduction of the new rules also raised concerns about privacy, with some highlighting the implications of the U.S.’ commitment to income tax for private transactions on public ledgers.

Kristin Smith, CEO of the Blockchain Association, had reservations about the merger of digital asset reporting with the regulations governing traditional assets. She pointed out that the crypto ecosystem differs significantly from the traditional asset landscape, advocating for tailored regulations that acknowledge these differences and don’t encompass ecosystem participants who lack a feasible route to compliance.

This development comes on the heels of Biden’s proposal to impose taxes on crypto mining as a measure to decrease mining operations. The budget proposal put forth on March 9th suggested implementing an “excise tax equal to 30 percent of the costs of electricity used in digital asset mining.”

The crypto industry in the U.S. has consistently voiced concerns over regulatory choices that could impact innovation within the nation. Grayscale Investments CEO Michael Sonnenshein warned that constant enforcement actions by the Securities and Exchange Commission (SEC) could drive crypto firms out of the country, stifling innovation. Similarly, Ripple CEO Brad Garlinghouse noted that the crypto industry is shifting away from the U.S. due to its comparatively sluggish regulatory process in contrast to countries like Australia, the United Kingdom, and Singapore.

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