digital assets tax
Yesterday’s IRS public hearing titled, “Gross Proceeds and Basis Reporting by Brokers and Determination of Amount Realized and Basis for Digital Asset Transactions,” on its proposed digital asset tax rules lasted two hours and featured 12 witnesses who each offered 10-minute presentations on their views.
The hearing was lead by counsel from the IRS and attorneys with Treasury’s Office of Tax Policy.
11 of the 12 participating witnesses were decidedly critical of the proposed digital asset rules.
The complete hearing transcript is here.
Shehan Chandrasekera, head of tax strategy at CoinTracker, was among the witnesses and distilled his views on the proposed rules on X, “If implemented as proposed, the broker regulations will likely generate a significant amount of incomplete and inaccurate data for all stakeholders in the chain. That includes brokers, the IRS, and taxpayers. And, we are very concerned about this. We have recommendations to solve this issue and enhance traditional information reporting. Read Cointracker’s comment letter.
Marisa Tashman Coppel, senior counsel at Blockchain Association, prefaced her testimony on X saying, “The Proposal exceeds Treasury’s statutory authority, is overbroad and vague, and violates the APA and the Constitution – including the 1st, 4th, and 5th Amendments.” Read her tweet thread. Also, read Blockchain Association’s 39-page comment here (PDF).
One unique area impacted by the rules are collectibles known as non-fungible tokens (NFTs). NFT marketplace OpenSea participated in the hearing and represented not only its own interests but that of artists and collectors. On the teleconference, OpenSea general counsel Gina Moon discussed the IRS’ digital assets tax proposal and how it doesn’t work with her company’s platform. “Collectibles are not representations of value though it may have value,” she began. Read her company’s 16-page comment here. In addition to addressing the proposed rules, there’s a condensed discussion of the NFT market and how it works.
“The IRS Should Heed This Warning – Devs are not brokers” – Bill Hughes, counsel at Consensys, on CoinDesk
what you should know: Unlike Congressional hearings, this one felt devoid of politics in spite of the fact Treasury is run by Secretary Janet Yellen, an appointee of the Biden Administration. The IRS’ tone was one of learning and appreciation for testimony. At least yesterday it was.
Senate Banking hearing
Senate Banking Chair Sherrod Brown (D, OH) has asked the prudential regulators to appear for an oversight hearing today at 10 a.m. ET in his Committee’s chambers.
The landing page with live video is here.
Michael Barr, Vice Chair For Supervision, Federal Reserve
Martin Gruenberg, Chair, Federal Deposit Insurance Corporation
Todd Harper, Chair, National Credit Union Administration
Michael Hsu, Acting Comptroller, Office of the Comptroller of the Currency
what you should know: Of note, Ranking Member Senator Tim Scott (R, SC) abandoned his Presidential campaign over the weekend. The “addition by subtraction” could mean more engagement in the Committee’s business from the Republican leader.
Senate Banking – FDIC
FDIC Chair Gruenberg devotes part of his Senate Banking Committee prepared testimony on crypto and makes clear that his agency has taken steps with banks and non-banks to mitigate the financial instability his agency believes is inherent with crypto. But, perhaps in anticipation of a question from Senator Bill Hagerty (R, TN), Gruenberg concludes by making a veiled reference to Choke Point 2.0 accusations stating: “The agencies continue to emphasize that banking organizations are neither prohibited nor discouraged from providing banking services to customers of any specific class or type, as permitted by law or regulation.” Read the testimony (begin page 22).
Also, stablecoins may be a point of discussion with the FDIC Chair. In the past, Gruenberg has been supportive of payment stablecoins and suggested at a Brookings event last October that a payment stablecoin, and distributed ledger technology, “may” have a pivotal role in the payment system.
Finally, Gruenberg will undoubtedly be questioned about the toxic work environment for women at his agency, which was revealed over the weekend by The Wall Street Journal.
Senate Banking – OCC
In his prepared testimony for the Senate Banking Committee, the OCC’s Hsu reiterated comments made at DC Fintechweek that tokenization – and not crypto – has caught his eye. He writes, “In the digital asset space, attention is shifting from crypto to the tokenization of real-world assets and liabilities. In contrast to crypto, tokenization is driven by solving real-world settlement problems and can be developed in a safe, sound, and fair manner. Next February, the OCC will host a public symposium on tokenization to take stock of developments, help enable strong foundations, and promote public discussion.”
gov luvs tokens
Right on cue yesterday, Office of the Comptroller of the Currency (OCC) acting comptroller Michael Hsu announced – by video on X – his agency’s conference next February 8 on the tokenization of real-world assets. The symposium promises to “include moderated panel discussions to explore the legal foundations for digital asset tokens, tokenization use cases, and risk management and control considerations. There will also be a panel discussion of academic papers on tokenization.”
pre-emptive v. parallel
Rep. Jim Himes (D, CT), who voted for passage of the stablecoin bill out of the House Financial Services Committee’s markup in July, tells Punchbowl News that he thinks empowering state’s isn’t going to work in order to make stablecoin law. He says, “The House bill — for it to pass, I think would probably need to go further, especially with respect to the Federal Reserve’s ability to step in when a state regulator has dropped the ball.” Read more on the stablecoin debate.
what you should know: Ironically, its the Democratic New York State members of Congress (Sen. Kirsten Gillibrand, Rep. Ritchie Torres, Rep. Gregory Meeks – maybe even Sen. Chuck Schumer?) who are unlikely to back off the need for “parallel” powers in stablecoin legislation. The New York Department of Financial Services (NYDFS) has too much at stake… i.e. maintaining New York City as the financial capital of the world.
Democratic lobbyist Better Markets and its CEO Dennis Kelleher were active on X yesterday promoting its views in a new article in Bloomberg. Kelleher writes on X, “Truth in advertising: will everyone please refer to this product accurately? They are ‘unstablecoins,’ as [Better Markets] spells out here.” Read it.
digital assets omnibus
On X yesterday, Ron Hammond, policy executive at Blockchain Association, published a detailed update on DC digital assets machinations amidst the current government funding drama. One element of his thread was devoted to the hoped-for use of say, the NDAA, as a way for Congress to “horse trade” its way into the adoption of new digital assets legislation.
Hammond writes, “The funding battle in Congress could alter the strategy for including crypto bills (both bad and good) in large legislative vehicles. Some thought a year-end omnibus bill would be a path forward or the defense funding bill. If those aren’t options there aren’t too many after…. Why do large legislative vehicles matter? Because the closer the 2024 election comes, the closer Congress shifts to messaging instead of policy. Finding floor time is also hard so tucking various bills with bipartisan support in these big bills saves time for other efforts.” Read the whole thread.
what you should know: Stablecoin law in 2025, anyone? 2026?
Former digital assets policy executive Zach Wong announced that he’s moving to the business side and has joined Uniswap Labs where he’ll work in a strategy and operations capacity for the company’s COO Mary-Catherine Lader.
Wong said on X in part, “My goal this summer was simple: I wanted to find a job where I could work hard, on important problems, with a team of people I greatly respected. I think I’ve found that, and I couldn’t be more excited.” Read more.
the lobby that was
Binance and its U.S. subsidiary, Binance.US, have severed all lobbying ties to DC. “FS Vector and Fierce Government Relations, both stopped lobbying for the firm at the end of September,” reports Politico. Read a bit more.
what you should know: What a difference a year makes. It was a year ago that Binance was sponsoring a December 1, 2022, Politico event called “2022 Crypto Summit.” And then FTX happened – which resulted in the cancellation of the event.
still more tips
Memorandum for Wednesday’s hearing: “Subcommittee on Digital Assets, Financial Technology, and Inclusion Hearing: ‘Crypto Crime in Context: Breaking Down Illicit Activity in Digital Assets'” (PDF) – House.gov
Rebuild or retreat? Crypto faces tough choices after FTX – The Financial Times
Crypto news site The Block shakes off SBF ties with Foresight Ventures deal – Cointelegraph
FTX Marks a Year in Bankruptcy. What We’ve Learned From Crypto Restructurings. – The Wall Street Journal
Crypto Crashed and Everyone’s In Jail. Investors Think It’s Coming Back Anyway. – Motherboard by VICE