US Lawmakers Considering a Tax Exemption for Small Cryptocurrency Trades

  • The newly-introduced bill would exempt all realised cryptocurrency gains under $200 from taxation.
  • The current state of the USA tax law stifles microtransaction-based innovation and discourages small-time traders from participating in the markets.
United States House of Representatives

United States House of Representatives. Toronto Hye

Four US congresspeople have officially suggested an exemption on capital gains tax for cryptocurrency trades. If the bill passes, trades that result in realised gains of under $200 will no longer be considered taxable events.

The bill was published by democrats Suzan DelBene (representing Washington’s first congressional district) and Darren Soto (representing Florida’s 9th district), as well as republicans David Schweikert (representing Arisona’s 6th district) and Tom Emmer (representing Minnesota’s 6th district) and is labeled “The Virtual Currency Tax Fairness Act of 2020”.

Bipartisan bills have become common in the last few years, with the 115th United States congress reaching the highest share of bipartisan bills in the last 20 years. This current “common sense” effort by the four lawmakers also has a high chance of passing, much to the delight of cryptocurrency enthusiasts.

Despite the anarchist and libertarian roots of cryptocurrencies, the increase of their reach also correlated with an increased acceptance of taxation. However the confusing regulation around crypto had no-one thrilled. For many traders of digital assets departing with some of their earnings was a much smaller problem than the calculation of the owed amount. The tax requirements caught many new adopters unprepared, and the tendency of cryptocurrency exchanges to only save 30 days of trading history did not help either.

In addition, the necessity to calculate tax on each individual trade, as required by US law, made the very investment in cryptocurrency significantly less appealing for small-time traders.

Perhaps even more importantly, the bill also provides relief for some of the more traditional use cases of cryptocurrencies, namely microtransactions. Some of the most innovative use cases of distributed ledgers involve a plethora of frequent payments of less than a penny – and having each one of them as a separate taxable event would stifle innovation – which is not the goal of lawmakers.

If the bill passes successfully in its current state, it would be applied retroactively to all transactions made in 2020.

Discussion
Related Coverage
Crypto.com Granted Major Payment Institution License in Singapore
  • Crypto.com has once again expanded its regulatory achievements with the acquisition of a major payment institution license for digital payment token services in Singapore.
  • The license, for which the company received an in-principle approval last June, enables the exchange to provide a greater range of payment services in Singapore.
June 1, 2023, 1:00 PM
crypto.com

Shutterstock

DeSantis Launches Presidential Campaign, Vows to Protect Bitcoin
  • The current governor of Florida, Ron DeSantis, announced he is joining the race for the 47th president of the U.S. during a Twitter Spaces event on Wednesday.
  • During his speech DeSantis declared his support for Bitcoin and the wider crypto space, noting that if Joe Biden is re-elected “they’ll probably end up killing it”.
IRS Files $44B Worth of Tax Claims Against FTX Bankruptcy
  • The IRS filed its claims against FTX under the “Admin Priority” classification, which could allow it to supersede the claims of other creditors in the bankruptcy case.
  • The largest of the claims is against Alameda Research LLC, with the IRS claiming around $20 billion in partnership taxes and close to $400 million in payroll taxes.