Some wondered whether the new rules and regulatory attention would encourage mainstream investors to join the space — or hurt the appeal of cryptocurrencies by killing its anything-goes ethos.
Cryptocurrency exchanges and others in the industry have raised concerns that the US Senate is rushing the rules into effect without consulting them first.
Filing taxes on crypto trades can create huge headaches, especially for those who conduct multiple transactions each year. While traditional stock brokerages are already required to send detailed tax forms to clients, crypto exchanges aren’t. Even if firms wanted to help their clients file taxes, it’s not always clear how to do that under the current regulations.
People who trade digital currencies must pay income taxes on any gains, even if some crypto investors have been ignoring their tax obligations. But even for those who want to follow the law, it can be difficult to keep track of what’s owed.
In addition, tax obligations can pop up in surprising places. People who use digital currencies to pay for things — like, say, a Tesla, or a pizza — are supposed to pay taxes on any increase in value of the crypto they spend. It’s a key difference between using digital “currencies” and actual, fiat currencies such as the US dollar to conduct commerce.
The new rules — a last-minute addition to the $550 billion bipartisan infrastructure package now being considered by the US Senate — would also force businesses to disclose trades of digital assets of more than $10,000. The provisions are designed to raise $28 billion. The measures add to increased scrutiny the IRS has recently applied to traders of Bitcoin, Ethereum and other digital assets. The agency has promised it will issue new rules that clarify how those virtual currencies should be taxed.
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- US crypto investors brace for more taxes, but with clearer rules for merchants
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