Regulation
Joe Biden Proposes New Crypto Regulations, Including Mining Tax and “Wash Sales Rule”
That of President Joe Biden budget proposal for fiscal year 2025, released this week, covers almost every area of the U.S. economy. Some of the most notable items detailed in the budget relate to new crypto taxes and regulations.
In terms of new taxes, the Biden administration revealed its proposed excise tax on mining cryptocurrencies.
“Any company using computing resources, whether owned or leased from third parties, to mine digital assets would be subject to an excise tax equal to 30% of the costs of electricity used in the mining digital assets.”
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If the excise tax passes, it would require miners to report the amount of electricity they consume and then be taxed on that electricity. This tax would be in addition to the gain on the asset sale tax that miners pay when they sell their tokens. The tax would be applied over three years, with the first year imposing 10%, the second year 20% and fully realizing the 30% tax in the third year.
“Increased energy consumption driven by the growth of digital asset mining has negative environmental effects and may have environmental justice implications as well as increased energy prices for those who share a power grid with digital asset miners”, according to cash Department. “Digital asset mining also creates uncertainty and risk for utilities and local communities because mining activity is highly variable and highly mobile.”
The White House projects the tax could raise $302 million in its first full year and $7.7 billion over the next decade.
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The report also mentions a proposed new role for wash the tradea form of market manipulation that typically involves the buying and selling of large quantities of assets over a short period of time, usually for the purposes of tax-loss harvesting.
“The budget eliminates this tax subsidy for cryptocurrencies by modernizing the tax code’s anti-abuse rules to apply to crypto assets just as they apply to stocks and other securities.” the White House said.
The proposal would ensure that the tax benefits of wash trading are only realized if the asset is sold and not repurchased within 30 days. This would incentivize some people not to participate in the wash trade and would increase tax revenues for those who continue to engage in the wash trade.
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The Biden administration projects the new rule will generate nearly $26 billion in revenue over the next decade.
The proposed budget received strong resistance from Republicans. Speaker of the House Mike Johnson (R-LA) said, “President Biden’s proposed budget price tag is another glaring reminder of this administration’s insatiable appetite for reckless spending and Democrats’ disregard for fiscal responsibility. Biden’s budget is not only off the mark, it is a road map to accelerating America’s decline. “
The budget is one of the most controversial issues in politics and often requires numerous revisions before being adopted. It is possible that some crypto regulations could be removed from Biden’s budget proposal. Nothing is certain until the final budget is voted on.
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