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- 1 U.S. Senate Committee on Finance asked industry’s help to address the crypto taxation issue.
- 2 A bill to remove smaller transactions from taxation is under development.
The United States Senate Committee has asked for help from the crypto industry experts to address tax challenges. These experts would try to make Congress understand how to handle better the scenario surrounding taxation challenges and opportunities surrounding digital assets.
U.S. Senate Asks For Industry’s Help to Address Crypto Taxation
On July 11, 2023, the U.S. Senate Committee on Finance Chairman and another Ranking Member, Mike Carapo, raised a series of questions in a public letter. These questions were around nine subjects, including loaning digital assets, wash sales, mining, and staking.
The letter states, “In recent months, the Committee on Finance initiates a bipartisan effort to identify key questions that lie at the intersection of digital assets and tax law.” Furthermore, the Internal Revenue Code of 1986 calls for a distinction between the property types but does not provide a classification for digital assets.
More clarity in tax regulations is needed for honest citizens wanting to pay taxes. Also, it creates a loophole for the bad actors to exploit. The Committee has asked the industry to submit the answers and suggestions by September 8, 2023.
In June 2023, House lawmakers requested the Internal Revenue Service (IRS) to release the planned crypto tax rules swiftly. This release would facilitate the gainers to pay taxes and the digital industry to comply with the regulations. In April 2023, an IRS Official said implementing the taxation rules should take around 12 months.
Last year Sen. Patrick Toomey (R-Pa) and Krysten Sinema (D-Ariz) pushed for the exemption of small digital asset transactions from tax requirements. The proposed Virtual Currency Tax Fairness Act was found to be similar to the previously introduced bill in the House of Representatives.
Sen. Cynthia Lummis and Democrat Kirsten Gillibrand (D-N.Y.) introduced a more comprehensive bill in 2022. The bill is yet to see the light of day, but it would have allowed citizens to use digital assets more efficiently. They shall be able to make everyday payments with them without worrying about taxation on every small transaction.
The IRS has declared on its website that “When you sell virtual currency, you must recognize any capital gain or loss on the sale.” Taxation methodology for digital assets has been a significant roadblock to using digital assets as an alternate source of payments in the United States.
If passed, the bill shall boost digital asset transactions for retail payments, subscription services, etc. Moreover, it shall also promote the development of decentralized blockchain infrastructure. Because the development of this infrastructure depends a lot upon smaller transaction fees, users avoid paying the fees as they have to pay taxes also.
The recent regulatory action surged in the United States carried on by the Securities and Exchange Commission (SEC). They recently sued the world’s biggest crypto exchange and Coinbase, alleging them of selling unregistered securities. Also, the agency named a select token, which shall be deemed a security and dealt with as such.
This scenario has caused a hostile environment for the digital asset industry in the U.S. If the bill is passed and users are relieved from the taxation worries; adoption would increase. Moreover, U.S. lawmakers are trying to develop a bill to regulate the crypto industry, which shall place more power in the hands of the Commodities and Futures Trading Commission (CFTC).
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
