Biden's 2025 Budget Proposes Three Major Changes to Cryptocurrency Regulations
Summary:
US President Biden's 2025 budget proposes three changes to cryptocurrency regulations. The first two aim at closing a tax loophole and implementing securities loan non-recognition rules to crypto loans. However, the third proposes a 30% tax on electricity used in cryptocurrency mining. This could increase operational costs and push many crypto miners to operate overseas. The administration's regulatory changes towards crypto are mostly positive but the punitive tax on crypto mining could mar these efforts.
In March, US President Biden presented his 2025 budget proposal, outlining three amendments on how federal legislation interacts with cryptocurrency. Some of these adjustments are advantageous, like applying existing securities regulations to digital currencies. However, one harmful alteration includes a unique tax on cryptocurrency mining.
First off, the proposal introduces two regulation revisions. The first plugs a tax loophole permitting crypto traders to claim losses on assets they sell and repurchase swiftly. The second ushers in non-recognition rules for security loans on actively traded cryptocurrency assets.
The initial tweak simply broadens existing regulations concerning stock and bond trading to incorporate digital currencies. Currently, shares sold at a loss can't be bought back within a 30-day window. Crypto regulations remain nebulous in comparison, with traders often buying back their digital assets within a shorter timeframe. The disparity between traditional stocks and crypto stems from regulatory lag, rather than any fundamental dissimilarities between the two.
The second revision is similarly based on an existing framework, adapting securities regulations to digital currency transactions. While cryptocurrency and traditional finance aren't identical, their similarities allow lawmakers to transfer regulations from the conventional finance landscape to the crypto sphere where fitting.
Both measures highlighted in Biden's proposal show how existing regulatory frameworks can be expanded without generating new bureaucracy or placing unreasonable demands on the nascent cryptocurrency industry.
However, Biden's proposition for a cryptocurrency mining tax takes a contrary stance. Bitcoin, existing on digital ledgers hosted on numerous computers, needs these computers to compete to validate new transactions—a process known as mining.
The taxation would impose a 30 percent levy on the electricity consumed in all crypto mining, including off-grid operations. Such a tax could force majority of cryptocurrency miners to relocate their operations overseas. This proposed regulation seems biased towards addressing environmental concerns raised about crypto mining. However, it doesn't consider electricity obtained privately or sustainably but instead raises the operational cost of crypto mining across the board.
Despite an otherwise positive regulatory adjustment, the Biden administration shouldn't blur their efforts by imposing a severe tax on cryptocurrency mining. By simply transferring securities trading rules to crypto, the administration can make big strides in much-needed regulatory changes. Strategic adjustments in these areas could significantly ameliorate associated issues.
Isaac Schick, a policy analyst with the American Consumer Institute, holds a master's degree in public policy from California Polytechnic State University. This article intends to provide general information and does not offer legal or investment advice. The author's views do not reflect or represent those of Cointelegraph.
Published At
4/10/2024 1:39:07 AM
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