Republican Congressman to Propose “Groundbreaking” Legislation in Support of Cryptocurrency, Blockchain Technology
A U.S. Congressman is planning to introduce a trio of bills to support digital assets and blockchain technology, as well as provide taxpayers with a safe harbor for forked cryptocurrencies, according to a press release published last week. While still a long way from being passed, the proposals are the latest sign of growing mainstream acceptance of the blockchain economy.
U.S. Representative Tom Emmer, a Republican from Minnesota is set to unveil the “Resolution Supporting Digital Currencies and Blockchain Technology,” the “Blockchain Regulatory Certainty Act” and the “Safe Harbor for Taxpayers with Forked Assets Act.” The bills are intended to provide a “simple legal environment” for the cryptocurrency market, thereby creating new pathways for blockchain development, innovation and adoption.
Under the proposed legislation, investors with exposure to forked currencies will be protected against tax penalties until the Internal Reserve Service (IRS) provides formal reporting guidelines for these assets. Taxpayers can meet their obligations only when they have a clear understanding of what’s expected of them, Emmer says. Similarly, lawmakers have pressed the IRS to provide more comprehensive guidelines for reporting to ensure investors don’t unknowingly violate tax laws.
“The United States should prioritize accelerating the development of blockchain technology and create an environment that enables the American private sector to lead on innovation and further growth, which is why I am introducing these bills,” Congressman Emmer said in a statement. “Legislators should be embracing emerging technologies and providing a clear regulatory system that allows them to flourish in the United States.”
The IRS has warned investors that a failure to report their cryptocurrency transactions may lead to fines of $250,000 and prison. However, there’s strong reason to believe that many people have underreported their crypto dealings or even failed to disclose their holdings entirely. Data from Credit Karma earlier this year showed only a tiny percentage of tax filers actually reported cryptocurrency gains and losses. While the vast majority of tax filers are not cryptocurrency holders, it seems that a disproportionately high percentage of actual traders are failing to report.
The agency has taken a proactive approach to investigating cryptocurrency transactions. In July 2017, the IRS issued a summons against Coinbase, one of the world’s largest cryptocurrency exchanges, in order to retrieve customers’ information and find unreported income. Later that year, Coinbase integrated tax reporting of capital gains and losses using first in first out (FIFO).
Tax experts say that the failure to report largely stems from confusion over “imputed” income, coin-to-coin transactions and hard forks. It’s also not entirely clear how current tax laws apply to goods and services purchased through cryptocurrencies. Although the IRS considers cryptocurrency to be “intangible property,” users themselves refer to it as digital money despite not being issued by the government. Tax laws do not require people to report capital gains and losses after every purchase, so applying a different standard to cryptocurrencies would be inappropriate. Although it’s not entirely clear how Emmer’s bills will address these issues, compliance without clarity is not feasible.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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