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

Crypto taxes

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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. Continue reading “Crypto Tax Change Proposed By Biden Administration; The Fed Speaks on Digital Assets”

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Digital Assets Hearing Highlights House Democratic Support for Digital Assets Legislation

Today’s inaugural hearing of the Digital Assets, Financial Technology and Inclusion Subcommittee titled, “Coincidence or Coordinated? The Administration’s Attack on the Digital Asset Ecosystem,” took place under the auspices of the House Financial Services Committee and Subcommittee Chair Rep. French Hill (R, AR).

See the 2+-hour video of the hearing.

In spite of the title and with a couple of exceptions (such as Rep. Brad Sherman (D, CA)), rather than a partisan food fight, the hearing was largely about creating a regulatory framework and what was needed.

With Republican support for digital assets legislation well-known, the hearing reaffirmed that some Democratic voices are pro-crypto, too, with members such as Wiley Nickel (D, NC), Bill Foster (D, IL) and the Subcommittee’s Ranking Member Stephen Lynch (D, MA) who each talked hopefully about the space but were eyes-wide-open about its challenges.

In his opening statement, Hill pointed out that the Subcommittee’s Ranking Member Stephen Lynch (D, MA) had partnered on a financial technology task force previously. Read his complete opening remarks.

Payment stablecoin legislation started by HFS Chair Rep. Patrick McHenry and Ranking Member Maxine Waters (D, CA) appears to be at the top of the list for regulation, Chair Hill wants to see move forward in the 118th Congress.

Ranking Member Lynch expressed optimism about the digital asset space in his opening statement, but acknowledged the challenges and irresponsible actions within the ecosystem including a lack of transparency. He wanted the “consumer’s voice” considered more in the overall digital assets discussion. Continue reading “Digital Assets Hearing Highlights House Democratic Support for Digital Assets Legislation”

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Senator Ted Cruz Wants A Seat At The Blockchain Legislation Table

Senator Ted Cruz

On Wednesday, Senator Ted Cruz (R, TX) re-introduced his efforts which began way back in 2021 to remove egregious taxation requirements of the  Infrastructure Investment and Jobs Act of 2021 on crypto companies.

At the time, Cruz’s press release noted today’s recurring concerns about the potential for innovation moving overseas: “Let’s not be the number one economic developer for the Communist Party of China by sending cryptocurrencies overseas.”

Cruz’s 2023 version, which has been referred to Senate Finance, is known in Senate records as S.695 (see it) or “A bill to repeal the provisions of the Infrastructure Investment and Jobs Act that impose new information reporting requirements with respect to digital asset transfers.” No co-sponsors are currently listed.  The bill is here (PDF).

Cruz has been signaling his interest lately about wanting a seat at the table of blockchain legislation. (Read the Houston Chronicle: “Ted Cruz is one of crypto’s true believers, even as calls for regulation grow.”) Continue reading “Senator Ted Cruz Wants A Seat At The Blockchain Legislation Table”

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Digital Assets Subcommittee Hits The Ground Running Today; House Ag Convenes, Too

French Hill

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today – digital assets subcommittee

All eyes will be on Digital Assets, Financial Technology and Inclusion Subcommittee Chair French Hill (R, AR) today as he hosts his committee’s first hearing titled “Coincidence or Coordinated? The Administration’s Attack on the Digital Asset Ecosystem.” See the hearing’s event page on House Financial Services website – starts at 2 p.m. ET.

Five current digital asset bills are listed for review such as HFS Chair Patrick McHenry (R, NC) and Rep. Ritchie Torres (D, NY) “Keep Innovation in America Act” and discussion draft’s of new, 118th Congress bills from House Minority Whip Rep. Tom Emmer’s (R, MN) and Rep. Warren Davidson (R, OH).

All of today’s prepared remarks are available from the hearing’s five witnesses including:

    • Mr. Mike Belshe, CEO and Co-Founder, BitGo (remarks (PDF))
    • Ms. Tonya Evans, Professor, Penn State Dickinson Law (remarks)
    • Mr. Jonathan Gould, Partner, Jones Day (remarks)
    • Mr. Paul Grewal, Chief Legal Officer, Coinbase (remarks)
    • Mr. Lee Reiners, Policy Director, Duke University (remarks)

Snippet from the testimony: Law professor Tonya Evans makes numerous suggestions on the way forward for digital assets regulation including: “Request the SEC to appear before Congressional oversight committees to explain how its aggressive piecemeal approach to regulation of crypto assets comports with efficient and effective regulation and in line with its legislative mandate to protect investors, to maintain fair, orderly, and efficient markets, and to facilitate capital formation.” Continue reading “Digital Assets Subcommittee Hits The Ground Running Today; House Ag Convenes, Too”

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CFTC Chair Rostin Behnam Says Stablecoins Are Commodities At Senate Agriculture Hearing

Rostin Behnam, CFTC

Today’s Commodity Futures Trading Commission (CFTC) oversight hearing by the Senate Agriculture Committee was broad in its remit as CFTC Chair Rostin Behnam provided an overview of the latest and greatest at his agency.

Video is here.

Chairwoman Sen. Debbie Stabenow’s (D, MI) opening remarks made clear digital assets were on the agenda with an allusion to recent events in digital assets such as the FTX implosion saying, “The massive customer losses caused by this misconduct highlight exactly why we need federal oversight of the crypto industry, and I remain committed to working with my colleagues to hold crypto companies to the same rules as traditional financial firms.”

In spite of the beginning of the hearing, the Digital Commodity Consumer Protection Act (DCCPA) was barely discussed thereafter as was any new specific new digital assets legislation that could come out of Senate Ag.

Ranking Member Sen. Boozman (R, AR) followed with his opening remarks which were complimentary of the CFTC and Behnam. The remarks briefly touched on digital assets: “I am confident the CFTC is suitable for an expanded role in regulating the digital commodity spot market. I am committed to working with Chairwoman Stabenow and our colleagues to create the safeguards the market needs.” Also, Sen. Boozman said that he appreciated the CFTC’s use of “No Action” letters in managing commodity and futures markets perhaps reflecting a more “light touch” approach to regulation by Republicans.

CFTC Chair Behnam built on Stabenow’s and Boozman’s themes and expressed the continued need for comprehensive regulation in digital assets in his opening remarks. He repeated what he has said many times before: “In the absence of direct regulatory and surveillance authority for digital commodities in an underlying cash market, our enforcement authority is by definition reactionary; we can only act after fraud or manipulation has occurred or been uncovered.”

Opening statements:

Q&A Continue reading “CFTC Chair Rostin Behnam Says Stablecoins Are Commodities At Senate Agriculture Hearing”

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Bipartisan Crypto Action Seen With New IRS Reporting Fix; Grayscale And SEC Argue

McHenry and Torres

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bipartisan crypto bill – house

A new bipartisan House bill announced yesterday will try to push through changes to egregious crypto broker definitions attached to the Infrastructure Investment and Jobs Act in 2021. The way it was written at the time, miners, stakers, hardware and software wallets as well as software developers would be on the hook for providing tax reporting documents to the IRS.

House Financial Services Chair Rep. Patrick McHenry (R, NC) and HFS committee member Rep. Ritchie Torres (D, NY) are co-sponsoring the new bill titled “Keep Innovation in America Act” and according to a quote from Chair McHenry, it “will fix the poorly constructed digital asset reporting requirements included in the Infrastructure Investment and Jobs Act.”

Co-sponsors are bipartisan, too: Reps. Warren Davidson (R, OH), Ro Khanna (D, CA), Darren Soto (D, FL.), Eric Swalwell (D, CA), House Majority Whip Tom Emmer (R, MN), Rep. French Hill (R, AR) and Rep. David Schweikert (R, AZ). Read more from Punchbowl News.

This is one of those “low-hanging fruit” bills/changes that could get crypto legislation momentum going – it’s generally perceived as small and hard to argue with. (Read what a staffer said last August about this change.) It may also help re-ignite bipartisan crypto interest which has sagged since the FTX collapse in November.

Tip: With the bipartisan support, seeds of the still-unannounced Congressional Blockchain Caucus for the 118th Congress may be appearing. Everyone attaching their name to this bill – except Rep. French Hill – was part of the caucus in the last Congress.
Continue reading “Bipartisan Crypto Action Seen With New IRS Reporting Fix; Grayscale And SEC Argue”

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Senate Takes On Crypto Mining; Rep. Waters Says It’s Time For Legislation

Senator Ed Markey

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Senate mining hearing

Today’s hearing on crypto mining will take place under the auspices of the Environment and Public Works’ Subcommittee on Clean Air, Climate and Nuclear Safety led by Chair Sen. Ed Markey (D, MA). The Senate hearing is in support of Markey’s newly-reintroduced legislation, the “Crypto-Asset Environmental Transparency Act of 2023.”

Politico reports that the legislation would require the “EPA to investigate the [crypto] industry’s environmental impacts” among other elements of the bill. Read more. Rep. Jared Huffman (D, CA) is leading the legislative charge in the House. See the witnesses for today’s hearing here which starts at 2:30 p.m. ET.

Democrat urges legislation

In an interview with CoinTelegraph, Ranking Member of the House Financial Services Committee, Rep. Maxine Waters (D, CA), states her interest in getting crypto legislation done in the 118th Congress. She says, “The world is moving on crypto: different countries, different things we still have to think about… I do believe that […] it has to be a priority of ours.” Read more. Waters adds that she’s “still optimistic” on stablecoin legislation, too.

Tip: Waters is only the second Democrat in Congress – after Senator Kirsten Gillibrand (D, NY) – to say something “pro-crypto-legislation” this year. Continue reading “Senate Takes On Crypto Mining; Rep. Waters Says It’s Time For Legislation”

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Circle Responds To White House With Stablecoin Treatise; Busy Week In DC

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the stablecoin syllabus

Request: Amidst the anti-digital assets missives emanating from the White House in late January (such as The Administration’s Roadmap to Mitigate Cryptocurrencies’ Risks), The White House Office of Science and Technology Policy (WHOSTP) put out a request for help with a “National Digital Assets R&D Agenda.”

Response: And, despite the WHOSTP glass-half-empty tweet announcing the initiative (digital assets are risky, but a CBDC sounds cool), Circle, who issues and maintains the USDC stablecoin, took the glass-half-full approach with its response.

Snippet: “Faster, Cheaper Payments with Programmable Money: Current financial architectures rely on often slow and expensive platforms — that necessitate the involvement of multiple intermediaries, parallel messaging through systems like SWIFT…” If you’re teaching a course in private stablecoins, this could be your syllabus – it integrates information from across the globe beginning with U.S. Treasury’s “The Future of Money and Payments” a key governmental response to President Biden’s Executive Order a year ago.

Tips:

what’s the Chair really like?

Capitol Account talks to former Republican Commodity Futures Trading Commission (CFTC) commissioner Jill Sommers. She provides her opinion on what it was like working with former CFTC Chair and current SEC Chair Gary Gensler, a Democrat: “If you talk to anybody who’s a career employee at the SEC, they’ve probably never in their career seen anyone like him. It’s our understanding that a lot of the proposals [Gensler is putting out] are not even run through the staff and the divisions that typically would be writing those proposals. It’s all out of his office. That is not surprising.” Read more from Capitol Account. Continue reading “Circle Responds To White House With Stablecoin Treatise; Busy Week In DC”