Crypto Tax Change Proposed By Biden Administration; The Fed Speaks on Digital Assets

Here’s today’s blockchain tipsheet… prefer it by email? Sign up here.

taxes – commodity vs security

The Biden Administration is planning on closing a tax loophole it perceives with cryptocurrencies and raising $24 billion according to The Wall Street Journal. “Currently… [crypto transaction sales] aren’t subject to the same so-called wash-sale rules that apply to stocks and bonds. That means people can sell their underwater crypto investments, take a tax-deductible loss and buy right back into the same investment.” Read more.

Tip: This potential taxation change all goes back to the “securities versus commodity” discussion and could be seen as a backdoor to regulating the digital assets industry by defining what is a commodity and what is a security.

taxes – bitcoin mining

A new tax embedded in the Biden Administration’s 2023 budget proposal wants to extract revenue from Bitcoin miners. “The U.S. Treasury Department has proposed a 30% excise tax on the cost of powering crypto mining facilities. (…) The tax would be phased in over the next three years, increasing 10% each year,” writes CoinDesk. Read more.

Gensler speaks

In an op-ed in The Hill, Securities Exchange Commission (SEC) Chair Gary Gensler returns to the media again with a defense of his position on cryptocurrencies and their need to be regulated (“come in and register, or else”).  Responding to critics, Chair Gensler writes, “I find the talking point that there’s a lack of clarity in the securities laws unpersuasive. Some crypto companies might message that the laws are unclear rather than admitting that their platforms don’t have sufficient investor protection.” Read more.

Tip: Gensler’s tempo of crypto-related communications remains at a high intensity.

Fed speaks – crypto risks

Federal Reserve Vice Chair for Supervision Michael Barr gave his first crypto speech of the new year yesterday at think tank Petersen Institute of International Economics in Washington D.C.

Titled, “Supporting Innovation with Guardrails: The Federal Reserve’s Approach to Supervision and Regulation of Banks’ Crypto-related Activities” (read it), the speech had the tenor of other recent digital asset-related announcements from bank regulators (12) related to cryptocurrency and risk to the banking system.

Fed speaks – another digital assets committee

Barr indicated that there will soon be something like a digital assets committee in the Fed: “We are creating a specialized team of experts that can help us learn from new developments and make sure we’re up to date on innovation in this sector.” It’s unclear if these will be members of the digital assets industry or non-industry types who will provide a semblance of objectivity or even surveillance.

In his concluding paragraph, Barr revealed the Fed still isn’t sure crypto is a match for the U.S. banking system: “We are working with the other bank regulatory agencies to consider whether and how certain crypto-asset activity can be conducted in a manner that is consistent with safe and sound banking. ”

CBDC bureaucrats

At a Cato Institute event (see video), “You can’t trust unelected bureaucrats” was the message of Majority Whip Rep. Tom Emmer (R, MN) on why his “CBDC Anti-Surveillance State Act” was necessary despite central bankers such as Fed Chair Jerome Powell saying there were no imminent plans for a CBDC. “I am not opposed to the central banking system,” said Rep. Emmer, but he believes, globally, CBDC momentum is gaining speed and the surveillance it affords is not a match for the United States.

more tips

If you would like this delivered as a newsletter, please sign up here.