• Biden government cracks down on crypto sector
• Off for a tax loophole
• High tax on electricity used for crypto mining
The US government under President Joe Biden is targeting the crypto sector in its budget proposal for 2024 published on March 9th. Among other things, the capital gains tax, which also affects cryptocurrencies, is to be almost doubled from the current 20 percent to 39.6 percent.
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Ban on wash sales
In addition, the Biden administration wants to close a popular tax loophole: So far, owners of cryptocurrencies have been able to sell their crypto assets at a loss, if necessary, in order to reduce the tax burden – only to then buy them again straight away. For stocks and bonds, this tax trick is prohibited by the so-called wash sale rule. However, since cryptocurrencies are not clearly classified as securities in the USA, this ban has not yet applied to them. President Biden wants to change this and extend the regulation to the crypto sector as well.
“Budget saves $24 billion by removing a special tax subsidy for cryptocurrencies and certain other transactions,” quotes BTC-ECHO from the 2024 budget proposal Tax laws modernized so they apply to cryptocurrencies the same way they apply to stocks and other securities.”
Crypto mining tax
The Biden administration is also targeting crypto mining companies. It wants to introduce an excise tax on energy – both purchased and self-generated – for mining digital assets. The percentage to be paid is to be gradually increased over three years from 10 to ultimately 30 percent. Between 2024 and 2033, the US government hopes this will generate additional revenue of around 3.5 billion US dollars.
After Ethereum switched to the Proof-of-Stake process, this tax essentially affects Bitcoin mining, as this uses the energy-intensive Proof-of-Work algorithm.
Market valuation rules also for digital assets
Biden also intends to extend mark-to-market rules to digital assets as well. Then companies that own digital assets would have to report them on their balance sheet with the current market value. According to “Trending Topics”, this should bring additional tax revenue of 5 billion US dollars into the US budget from 2024 to 2033.
resistance expected
If the Biden administration’s plans actually go ahead, it would be a devastating blow not only to the US-based mining industry, but also to the many crypto investors who have suffered huge losses during the current crypto bear market. However, because Biden’s Democrats do not dominate both houses of Congress, and the Republicans hold the majority in the House of Representatives, it is unlikely that Biden’s budget proposal will receive a majority and be implemented in its current form.
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