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.