The Blockchain Association, a crypto advocacy organization based in the United States, has put forth recommendations for lawmakers to contemplate regarding potential legislation concerning the taxation of digital assets. In a letter dated Sept. 8, 2023, and addressed to U.S. Senators Mike Crapo and Ron Wyden, the Blockchain Association voiced its support for the Keep Innovation in America Act, a bill aimed at altering the reporting obligations imposed on specific individuals engaged in cryptocurrency transactions.
According to the association, any legislative proposals introduced in the halls of Congress should establish a balance in the tax treatment of cryptocurrency and traditional assets. Furthermore, it should elucidate the prerequisites for disclosing income generated through activities such as staking and mining within the cryptocurrency sphere. The association urged the committee to dedicate its attention to crafting deliberate and well-considered legislation pertaining to taxation issues specific to digital assets.
Additionally, the letter stated that the committee should exercise caution and avoid enacting legislation that would impose less favorable tax treatment on digital assets when compared to traditional assets. Instead, the focus should be on legislation that levels the playing field between digital and traditional assets.
Several of these suggestions bore similarities to those set forth by Coin Center back in August. Notably, the center recommended the institution of a de minimis threshold that would exclude losses or gains from particular crypto transactions from the purview of tax reporting obligations. Further recommendations for Crapo and Wyden encompassed opposition to a proposed digital asset mining excise tax that had been put forth by the Biden administration. The contention was that such a measure might hinder the growth and advancement of the cryptocurrency industry.
The proposal, originally unveiled in March 2023 as part of President Joe Biden’s 2024 fiscal year budget, contemplated the imposition of a 30% excise tax on the electricity consumed by cryptocurrency miners. The tax generated significant controversy, with critics asserting that it could result in increased global emissions as miners might relocate to countries with higher emission levels during energy production.
The demand for guidance on crypto taxation from U.S. legislators emerged following an announcement by the IRS on July 31, 2023, that taxpayers must report staking rewards as gross income in the year they are received, thus establishing new standards for U.S. taxpayers beginning in 2024.
The IRS predominantly taxes activities involving the purchase, sale and exchange of cryptocurrency as capital gains and losses, a framework that also applies to mining rewards. Mining companies such as Bit Digital Inc. (NASDAQ: BTBT) are likely to take a keen interest in this law-making process since it directly affects their operations and bottom lines.
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