At the height of mainstream crypto adoption, there have been serious calls for crypto regulations globally. The US is leading the rest of the world in this regard, moreso with the recent Infrastructure bill which has already been passed by the Senate. Reports have emerged that US lawmakers are giving thought to upping the ante on crypto taxes that will be used in financing the country’s $3.5 trillion budget.
Citing ‘certain high-income individuals,’ the suggestions put forward by the lawmakers would see the bar on long-term capital gains taxes raised from an existing 20% to a whopping 25%. A 3.8% surtax will also be charged on top of the proposed 25% bringing the total tax percentage on capital gains to 28.8%. However, the proposed taxes would only apply to high-income crypto investors also known as whales in crypto parlance.
‘Wash Sales’ Rules to Regulate Cryptocurrencies
More suggestions by lawmakers indicate that cryptocurrencies will now fall under the ‘wash sale’ rules. These rules ensure that investors are not able to lay claim to tax deductions on repurchased assets within a 30-day sale period.
Extant laws under the Internal Revenue Service already classify digital currencies as being assets under the wash sales rules. Noting that some crypto investors in the US have been hiding under the decentralized and private nature of cryptocurrencies to evade taxes, the US lawmakers are willing to shut this gap.
If the latest proposal receives the force of law, it would also see the obligation for tax reporting imposed on crypto investors in the US under the new wash rules. This provision will take effect by the end of the year. Additionally, the tax percentage rule is retroactive, starting from last Monday- September 12.
US Infrastructure Bill Receives Passage Despite Controversy
Earlier this year, reports had indicated that the current administration was deliberating on capital gains tax as high as 43% for wealthy investors. At the time, lots of backlashes had trailed the proposal. Notwithstanding, the new Infrastructure bill is the US government’s response to calls for regulations over the last few months. Although the bill’s arrival had been a series of controversies among different sections of the House, it received passage a few weeks ago.
Serious talking points have been around the language of the bill, particularly in the definition of the term ‘broker.’ In the bill, ‘broker’ had been defined to include businesses outside crypto exchanges such as miners and wallet service providers. Following the language conflict, an amendment session has been scheduled for later this month.
US regulators are also considering drafting out regulations for decentralized finance activities, on which the US-based crypto exchange, Coinbase, had a run-in with the US SEC last week. The US SEC had threatened Coinbase with a lawsuit if it goes ahead to launch its LEND product, on which users would earn a yearly interest of 4% after depositing stablecoin USDC.