As many of us know, Congress has recently passed a 1.2 Trillion dollar ‘Infrastructure’ bill. This is a massive document, and many questions have been raised regarding its contents since it passed. One of the topics that stood out to many was that of Cryptocurrency, sparking debate regarding the long-term impact this bill will have on the way we transact cryptos and pay taxes on them.
Cryptocurrencies have been a target of political debate in recent months as both sides of the aisle looking to capitalize on the trillion-dollar ecosystem. One of the proposed measures looks to raise upwards of $28 billion dollars over a ten-year period through additional regulation of the cryptocurrency market. “Regulation” in this case generally refers to a crackdown on cryptocurrency exchanges.
This additional provision was added on August 10th in the version that passed the Senate in order to comply with a measure that the bill would pay for itself. As in, if 28 Billion is needed to fund the infrastructure package, then 28 Billion must be raised in taxes resulting from the various provisions in the bill. The specific section that has caused worry is – “Sec. 80603. Information reporting for brokers and digital assets”, which outlines a slew of reporting requirements for “brokers” that deal in “digital assets”.
Many have argued that this definition is extremely broad, and can lead to massive cases of overreach and downstream consequences. The reason being that digital assets as defined in this bill the term digital asset means any ‘digital representation’ of value that is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary.
Some senators, skeptics, and crypto think-tanks believe that this very broad definition can apply to money in the bank, airline miles, loyalty cards, and any other digital representations of value.
What is the current crypto-tax situation?
Most if not all of the large cryptocurrency exchanges abide by Know Your Customer (KYC) rules and regulations. This entails collecting personal identifying information (PII) from exchange users and reporting annual transaction activity to the IRS accordingly.
Currently, the IRS defines cryptocurrencies as property, much like stocks, gold, or real estate. This means that you will have to pay ‘capital gains tax’ if you sell your cryptocurrency assets for a profit.
In the fast times that we live in, regulations are changing by the week. Whether you’re currently a cryptocurrency investor or plan to be one day, these changes can impact your dealings on many different levels. Therefore, it is crucial that you stay up to date on the latest changes and ensure compliance in order to avoid serious headaches down the road.
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