The comprehensive bipartisan cryptocurrency bill composed by US Senators Kirsten Gillibrand and Cynthia Lummis was presented in the upper chambers of congress and is termed as the Responsible Financial Innovation Act.
According to Senator Lummis, the US is the financial leader in the world, thus it is crucial to include digital assets into existing laws in order to take advantage of their transparency & efficiency and provide more opportunities for the country’s future generations. So, how will crypto be taxed moving forward? Let’s find out from the highlights of the Lummis-Gillibrand bill.
The in-depth bill shows a nuanced and thoughtful understanding of multiple key features unique to the cryptosphere, which needs regulation, but at the same time, requires room for innovation. The bill tries to strike a balance between them while providing pragmatic solutions on many points, such as:
- The Internal Revenue Services (IRS) sees crypto as property, meaning transactions taking place on crypto exchanges lead to capital gains or losses. Prior to this bill, a transaction for any type of goods or services triggered a capital gain. Now, this bill gets rid of any tax on transactions up to $200 to encourage crypto use. So, yes, this new proposal might change how crypto will be taxed a bit.
- The bill also establishes a clear differentiation between which digital assets will be commodities and which ones will be securities. As per the proposal, tokens such as Bitcoin, Ethereum, and several others will be classified as commodities by determining the objective of the asset and the powers or rights that it offers the consumer. And as commodities, these digital assets will be regulated by the Commodity Futures Trading Commission (CFTC). From this, we can ascertain that it might also change how crypto is taxed.
- Owing to the recent TerraUSD stablecoin collapse, the bill establishes a 100 percent reserve for stablecoins. This ensures that the token holders can redeem their tokens for the pegged asset at their convenience. The Lummis-Gillibrand bill also has a detailed framework for all credit unions and banks to issue payment stablecoins on their own.
- The bill asks the Securities and Exchange Commission and CFTC to research and report on the formation of a self-regulatory organization (SRO). Both the agencies would have to create extensive guidance concerning cybersecurity and cryptocurrencies in collaboration with the Treasury and the National Institute of Standards and Technology.
- As per the bill, the Federal Energy Regulatory Commission has to look into the energy consumption of the crypto industry and report to Congress.
- Finally, the bill mandates the Government Accountability Office (GAO) to analyze the risks related to making investments in crypto retirement funds and report the findings to Congress.
The Takeaway
At the moment, the provisions mentioned in the bill are sensible, logical, and workable. The bill’s chances of passing before the approaching midterm elections in November, which will determine which party controls the Senate and House of Representatives, are slim.
Many candidates are focusing on major issues that might help them win the elections. A recent Pew Research Center found out that Crypto doesn’t come in the top 20 issues. The majority of media outlets speculate that it might take a year for the bill to get approval. Until then, crypto taxes will be the same.
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