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President Biden’s budget includes proposals to change the taxation of cryptocurrency trading, eliminating the ability for investors to use their losses to lower taxes.
The new provision will raise $24 billion, according to the White House.
Currently, the sale of cryptocurrencies is not subject to the rules that stock and bond investors must follow. Investors can sell their cryptocurrency investments at a loss, absorb tax-deductible losses to reduce their tax burden, and quickly buy back the same investments.
The budget eliminates this and imposes the same so-called wash sale rules on cryptocurrencies that apply to stocks and bonds.
House Democrats introduced a bill to the last Congress that would close tax loopholes by imposing “wash sale” rules on commodities, currencies, and digital assets. The IRS treats virtual currencies as properties, not security. This is how asset classes get around these rules.
President Biden has already passed crypto-related tax provisions in the 2021 Infrastructure Bill, causing an uproar in the industry. The law broadly defines a virtual currency “broker” and allows the Internal Revenue Service to target cryptocurrency miners, developers, and others who may be considered brokers. I’m here. Even if you don’t have a customer or don’t have access to the information you need to comply with tax reporting requirements. .
The Treasury Department later clarified that miners, validators and other cryptocurrency users are not classified as cryptocurrency “brokers” under tax reporting rules.
Biden’s proposal, in a speech delivered Thursday at the Peterson Institute in Washington by Federal Reserve Board Supervisor Michael Barr, is that the same regulations that protect banks should apply to cryptocurrencies. It comes from warning banks to be cautious when it comes to similarities without squashing innovation. crypto space.
The Federal Reserve, the FDIC, and the Office of the Comptroller of the Currency last month used money from crypto firms to monitor liquidity and encourage banks to maintain strong risk management practices to prevent bank runs.
The warning comes just as Silvergate Capital, one of the top banks in the cryptocurrency market, has become the first cryptocurrency bank to fail after feeling the ripples from the FTX collapse that caused billions of dollars in withdrawals. The time has come.
“Like everyone else, we’ve seen what’s going on in the crypto space, but what we’re seeing is so much chaos. We see a lot of lack and taking risks and things like that,” Powell told lawmakers earlier this week.
“What we have done is to ensure that the regulated financial institutions that we oversee and regulate are careful and meticulous in how they engage with the entire crypto space. That’s it.”
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