The recent announcement of new crypto tax reporting rules by U.S. President Joe Biden has triggered strong criticism from several well-known voices in the crypto community. The Internal Revenue Service (IRS) proposed on August 25 that brokers adhere to stricter guidelines for the sale and trade of digital assets. This move, aimed at curbing tax evasion, would involve the introduction of a new form to simplify tax filings and deter fraudulent activities.
Critics warn of the impact on the industry in the US
According to the U.S. Department of the Treasury, the intent behind these proposed regulations is to align digital asset reporting with the reporting standards for other types of assets. However, a substantial portion of the crypto community contends that these stringent measures could potentially distance the crypto industry from the United States.
Ryan Selkis, the CEO of Messari, was among those in the crypto community expressing disapproval of the new rules. He pointed out that if Joe Biden secures reelection, the crypto industry might find it difficult to thrive within the country. Selkis’ sentiment is echoed by Chris Perkins, the president of crypto venture firm CoinFund, who believes that other countries have taken a lead in the crypto landscape, leaving the U.S. behind. Perkins advocates for simpler and more comprehensive regulations that foster safe innovation across the crypto sector.
Critics in the crypto community also express skepticism about the extent to which either the Democratic or Republican parties would prioritize crypto interests within the U.S. political framework. While acknowledging the lack of confidence in both parties, some community members note that the situation appears less favorable than during the previous presidential term. Privacy concerns have also surfaced, as members of the crypto community also observe that the newly proposed rules could lead to increased surveillance of private transactions on public ledgers due to the United States’ commitment to income tax enforcement.
Prominent industry figures fear the impact on innovation and growth
Kristin Smith, CEO of the Blockchain Association, expressed reservations about merging reporting standards for digital assets with those of traditional assets. She underscored the need for tailored regulations that consider the unique nature of the crypto ecosystem and avoid placing undue compliance burdens on participants without a clear pathway to adhere to the rules.
This move follows Biden’s earlier suggestion to impose taxes on crypto mining as a means of curbing mining operations. A budget proposal from March 9 outlined plans for an “excise tax equal to 30 percent of the costs of electricity used in digital asset mining.” The U.S. crypto community has repeatedly voiced concerns about regulatory decisions hampering innovation within the nation. Grayscale Investments CEO Michael Sonnenshein highlighted the potential negative consequences of the Securities and Exchange Commission consistently resorting to enforcement actions.
He warned that overreliance on legal proceedings would stifle the innovation taking place in the sector. Similarly, Brad Garlinghouse, CEO of Ripple, emphasized that the U.S. crypto industry is shifting its focus away from the country due to its comparatively slower regulatory processes. Other countries such as Australia, the United Kingdom, and Singapore have shown a swifter response to crypto regulation, prompting concerns about the U.S. losing its competitive edge in the global crypto landscape.
The introduction of new crypto tax reporting rules by President Biden’s administration has ignited a wave of criticism from influential figures in the cryptocurrency space. While the intention behind these rules is to enhance tax compliance, critics argue that the stringent regulations could hinder innovation and drive the crypto industry away from the United States. As debates over the future of crypto regulation continue, the industry watches closely to see how these measures will shape the trajectory of crypto adoption and growth within the country.
