An additional element to explain the precipitous fall of the cryptocurrency market. The Biden administration has announced a new tax plan for investors, increasing capital gains taxes from 20% to 40%. At the same time, we learn of a desire to tax the electricity used for Bitcoin (BTC) mining at 30%.
Joe Biden attacks cryptocurrency investors
The president of the United States, Joe Biden, presented his budget plan for the year 2024 this Thursday, March 9. He plans to cut budget spending by $3 trillion over the next decade, proposing to raise taxes on big business and the big money, cracking down on fraud, but also by taxing cryptocurrencies more harshly.
First, Biden’s plan calls for a new 25% tax on unrealized gains in cryptocurrencies, that is to say even if these have not yet been sold. A proposal which is not new and which had already made investors smile, as the volatility of the market would make its application complicated.
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Afterwards, taxation on capital gains in cryptocurrencies should be almost doubled, rising from 20% to 39.8%. A reform much more possible and which already worries American investors. Note that this degree of taxation would be higher than in any European country.
Separately, the Biden administration wants to expand into the cryptocurrency market a rule that until now only concerned the stock and bond market. This is the “Wash-Sale Rule”, which consists of selling assets at a loss for tax purposes, before buying them back immediately afterwards.
To finish, the Bitcoin mining industry is also targeted. US government proposes 30% tax on electricity used for Bitcoin mining, deemed as “a barrier to the transition to a low-emission energy future”. Note that this proposal has very little chance of being accepted, as it is difficult to implement.
A sumptuously chosen timing to make these announcements. This hunt for small savings by the Biden administration, particularly targeting cryptocurrencies, comes as Bitcoin is in full correction. The price of BTC ended up breaking the support of 20,000 dollars and continues to fall.
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What about feasibility?
If this “Wash-Sale Rule” were to pass, she would fall just about : the majority of cryptocurrency investors entered during the previous cycle in 2021 is lost today. This would therefore represent a significant saving for the American government.
The reason why cryptocurrencies are not considered in this “Wash-Sale Rule” is that they are not “securities” in the eyes of the administration. One thing the US government seems to want to change.
It strongly echoes recent attacks by the Securities and Exchange Commission (SEC) against the main players in the cryptocurrency industry and more particularly the centralized exchange platforms.
The latest concerns KuCoin. The exchange is being sued for sale of unregistered securities to citizens of the state. Indeed, the Attorney General considers Ether (ETH) as a “securities”.
Between the interventions of the SEC, the lawsuits of the courts of the various States and now the interventions of the American government, this regulatory crusade materializes quite suddenly, but seems to have been prepared for months.
👉 Can SEC actions influence crypto regulation in Europe? Interview with Meria
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Journalist for Cryptoast, I strive to dissect every detail of the exciting world of cryptocurrencies and make it accessible and understandable to as many people as possible.
Lilian Aliaga
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