Cryptocurrency tax bills are back on the table in the US House of Representatives, as Warren Davidson has reintroduced the Token Taxonomy Act (TTA). Davidson originally tabled the bill back in 2018, but it was designed to prevent cryptocurrencies and digital assets from being labelled securities. In the latest rendition of the bill, a much deeper definition of cryptocurrencies will officially amend the Securities Act of 1933 and the Securities Exchange Act of 1940. If the bill passes, it will create an entirely new asset class for cryptocurrencies and a new tax regime to go along with it.
Meet the TTA
The TTA is an ambitious bill that could cause a lot of controversy in the American crypto industry. The bill will create a bit of a grey area and potentially a rather lucrative tax loophole, whereby investors and traders will be able to pay less taxes than they would otherwise be paying. Trading cryptocurrencies wouldn’t be a taxable event, while the profit from this activity would be classed as taxable – much like standard stock trading. On top of this, taxes would need to be adjusted on individual pension plans that have exposure to cryptocurrencies in order to reflect this.
Could be a Long Time Coming
Unfortunately, changing 80-year-old laws and regulations isn’t going to be a walk in the park. It’s going to take a significant amount of time for the TTA to make it anywhere near Trump’s desk – and we will likely see a lot of changes sprouting up. The current draft of the bill will most definitely undergo some significant changes in order to appease both political parties, so that it can receive the bipartisan support that it desperately needs.
Bills Passing in Local Law
The United States works a bit like Europe in the sense that there are laws provided by the central government, while each region can create their own sub-laws. Taking full advantage of this legal system, states up and down the country have been passing their own crypto legislation. Rhode Island recently passed a bill that exempts utility tokens from securities laws, while New Hampshire passed a bill that will allow businesses to pay their corporate taxes in Bitcoin. More states are creating their own bills, putting huge pressure on the White House to create a countrywide set of regulations.
If the TTA eventually passes into law, we could see a whole new wave of crypto activity in the United States and great optimism for a bullish market. If more investors can gain access to the crypto world and benefit from tax deductions, the TTA will prove to be incredibly popular. We’re going to have to watch closely from the sidelines as the bill gets tossed around like a football inside the House of Representatives.