- The IRS has issued updated tax rules that focus on transparency in cryptocurrency transactions.
- Critics, including prominent figures in the crypto sector, worry that the new regulations could slow down the growth of the U.S. crypto market.
- This move from the government adds to a series of steps aimed at controlling cryptocurrency, sparking debates about the asset class’s future in America.
On August 25, the Internal Revenue Service (IRS) shook up the cryptocurrency community by revealing an updated set of tax regulations for digital currencies. Brokers facilitating crypto transactions must now follow new guidelines, complete with an updated tax form designed to improve clarity in tax reporting and minimize dishonest dealings.
According to the U.S. Treasury Department, the purpose of the new rule is to make sure crypto dealings are reported in the same way as other types of financial transactions. The aim is a level playing field for tax reporting, whether it’s stock trading or Bitcoin swapping. But not everyone sees it that way.
Ryan Selkis, the leader of cryptocurrency research firm Messari, has warned that the newly released rules could be a stumbling block for the crypto industry, particularly if President Biden wins re-election. The general feeling among crypto enthusiasts seems to echo Selkis’s apprehensions. Concerns are being raised about both the Democratic and Republican parties and their possible effects on the fate of cryptocurrencies.
Moreover, critics highlight that the new tax rules might be invasive, infringing on individuals’ financial privacy. These privacy issues tie back to a long-standing American view on income tax, questioning whether these regulations could limit the possibility of private transactions going forward.
This isn’t the first time the Biden administration has leaned toward imposing restrictions on crypto. Earlier this year, a proposal was brought up to tax digital asset mining based on the amount of energy consumed, under the guise of environmental concerns.
Michael Sonnenshein of Grayscale Investments had previously warned on August 13 that an unfriendly regulatory environment could force crypto companies to consider relocating their operations. His warning rings louder today, underlining that, for many in the crypto sector, these new tax regulations are just another instance where the government is missing the mark.
As regulations pile up, those deeply involved in cryptocurrencies are left pondering the future of this financial technology in the United States. The latest IRS update is a contentious topic, and it appears the dialogue is far from over.
SEC’s Cold Shoulder to Cryptocurrency Continues
The U.S. SEC have often reflected caution. Charged with protecting investors, maintaining fair markets, and encouraging capital formation, the SEC finds cryptocurrencies pose unique challenges in all these areas. For instance, the lack of regulatory oversight in Initial Coin Offerings (ICOs) has been a point of concern, leading to legal battles with companies like Ripple to enforce compliance.
Additionally, the high volatility of cryptocurrencies could endanger both individual and institutional investors, adding another layer of caution for the agency. It’s important to note that the SEC’s primary duty is to the investor, and in a rapidly evolving and sometimes opaque landscape like crypto, caution should not necessarily be interpreted as outright hostility.