US: cryptocurrency taxation on the menu of a new bill
In early August, the cryptocurrency industry was in turmoil in the United States. At issue was theInfrastructure Bill, the massive $1.2 trillion stimulus package, including an amendment forcing many industry players. As a result, DeFi players may have to file tax returns with theInternal Revenue Service (IRS).
After a complex period of negotiations, the contentious amendment was passed because one senator opposed the hard-fought compromise. The industry thought it would be “safe” until the stimulus package was discussed in the House of Representatives in the fall. But then a new bill came along.
Like a sequel to a novel, the US Treasury is back at it again with the $3.5 trillion Reconciliation Bill, which is misnamed for cryptocurrencies. Because no, it’s not about hanging on to the branches, but rather cutting off the trunk of the tree on which the industry’s players are sitting.
Targeting foreigners registered on US exchange platforms
According to a member of the Biden administration who prefers to remain anonymous, the U.S. Treasury would like to require U.S.-based exchange platforms, such as Coinbase, Kraken or FTX, to report the data of non-American users to the IRS.
This information would be exchanged with other countries, which could then ensure that their tax residents have reported their capital gains to the local tax authorities. Coin Center Executive Director Jerry Brito shared the information on Twitter:
– Jerry Brito (@jerrybrito) August 30, 2021
However, the Reconciliation Bill is far from a final vote. Republicans appear to be opposed to the bill as a whole, and the vote of all fifty Democratic senators would then be required.
Now, since the events of August regarding the other stimulus package, it is known that some Democratic senators, such as Ron Wyden, are on the side of the cryptocurrency industry.
Admittedly, crypto-currencies would only be a drop in the bucket in the Reconciliation Bill. But it’s already known that the contentious proposal wouldn’t pass so easily.
What is certain is that the Biden administration is clearly pushing digital assets, both on industry players than crypto-asset owners. The difference is that this time, this proposal would explicitly target non-Americans.
The US would like to catch the big wallets
The reason is simple: the U.S. Treasury already exchanges some information with other countries to ensure that cryptocurrency holders pay their taxes when they owe them. But the Treasury seems convinced that the big fish are making complex legal arrangements, including offshore companies, to avoid paying taxes.
So it would be a give-and-take: on the one hand, Americans report non-Americans registered on American platforms; on the other hand, other countries report the information necessary to allow the Treasury to track down these big fish.
The taxation of cryptocurrencies: a sensitive topic in the United States
Let’s be clear: the Reconciliation Bill is a legislative behemoth, both financially and in terms of planned measures. Cryptocurrencies are not the priority of the Senator or even the Biden administration.
Still, this administration has already, on several occasions, spoken openly about stricter regulation of the digital asset sector. The severity would be seen in particular on the tax side and the amendments voted or discussed are all related to taxation and declarations to the IRS.
The Biden administration seems to be clearly leaning towards regulators who are reluctant to help the industry, as we see in Europe and especially in France. It follows the same guideline as the FATF, which has always wanted to crack down on the cryptocurrency sphere. Case to follow in the United States.
On the same subject – FATF guidance: a potential strengthening of constraints for DeFi players
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About the author : Benjamin Allouch
Lawyer specialized in digital and personal data law. He quickly became interested in bitcoin and blockchain technology, and founded the blog bitcoin-blockchain.fr. He is interested in the emergence of blockchain law and the legal consequences of this technology.
All articles by Benjamin Allouch.