Cryptocurrency in the US could be set for a massive identity change, as rumors of upcoming discussions on a recently tabled bill grow. Dubbed the ‘Token Taxonomy Act’, the bipartisan bill was put forward by Republican Warren Davidson and Democrat Darren Soto bill in late December and seeks to make several amendments to existing securities laws, which have laid largely untouched since 1933 in a bid to clarify the status of digital assets. Congress is due to meet on February 14th and talk is gathering speed that the bill will be introduced there for discussion, but not everyone is convinced.
Tax-Free Crypto Trading
The Token Taxonomy Act seeks to make several changes to the Securities Act of 1933 and the Securities Exchange Act of 1934 which, the bill’s proponents argue, leaves the emerging digital asset market in a gray area that could stifle innovation and confuse investors. The bill requests, among other things, that crypto exchanges and crypto-crypto transactions be exempt from tax, which would hugely relieve the burden on tax authorities who are already struggling to cope with how to tax cryptocurrency transactions.
As the space grows, more and more people will be filing cryptocurrency transactions as part of their annual declarations, which will require transactional evidence, something it is often extremely hard for amateur investors to collect and present, and even harder for authorities to verify. Scrapping tax requirements on non fiat-related activities would lose the IRS a portion of tax, but would allow them to better collect gains that involve fiat transactions at either end that would be far easier to verify.
“Don’t Hold Your Breath”
Should the bill pass, not only will securities laws be changed for the first time in 85 years to reflect the addition of digital currencies, but the entire ecosystem would fall into the regulatory hands of the Commodity Futures Trading Commission or the Federal Trade Commission, which would loosen restrictions somewhat. Supporters of the bill cite the early days of the internet where over-regulation was successfully resisted, allowing American companies to flourish and help the new technology prosper. With Congress due to sit on February 14, some are getting excited about the prospect of it being introduced soon, but others are not as convinced by its prospects, at least in the short term:
I don’t know if there’s any validity to the rumor that the Token Taxonomy Act will be reintroduced in Congress on February 14, but even if true, there will be months or years of Committee hearings & revisions before the bill could even possibly see a vote. Don’t hold your breath.
— Jake Chervinsky (@jchervinsky) January 26, 2019
With the government reopening for a three-week period before potentially being suspended again, and with national security issues escalating on a daily basis, it seems highly unlikely that crypto classification is going to be high on the list of priorities for Congress. Of course, if Trump were to ask for $5.7 billion in Bitcoin…