Chairman of the House Financial Services Committee Patrick McHenry today claimed that the Biden Administration was trying to "kill" the digital asset industry in the U.S. with its new proposal for crypto tax regulations.
McHenry (R-NC) said in a statement Friday that the new proposal was lacking clarity and urged for clearer rules.
Top cryptocurrency exchanges may soon have to report customer information to the Internal Service Revenue (IRS) under the rules proposed by the Biden Administration on Friday.
"The Biden Administration must end its effort to kill the digital asset ecosystem in the U.S. and work with Congress to finally deliver clear rules of the road for this industry," said McHenry, adding that any "proposed rule must be narrow, tailored, and clear."
The proposed rules from the U.S. Department of the Treasury and the IRS aim to target crypto investing tax dodgers.
President Joe Biden yesterday dropped a $6.9 trillion budget plan. The huge blueprint—which is expected to be rejected in the GOP-controlled House—wants to increase taxes on the wealthy and corporations to reduce a massive deficit.
And that includes crypto traders and investors. The document says it wants to close the “loophole that benefits wealthy crypto investors” by focusing on wash sales of digital assets. So what will that mean for the average crypto investor if this ambitious proposal is...
American taxpayers currently owe tax on gains, but this can be a difficult and expensive process. These new rules, Friday's statement said, make the process easier to "close the tax gap."
"This is part of a broader effort at Treasury to close the tax gap, address the tax evasion risks posed by digital assets, and help ensure that everyone plays by the same set of rules," the Treasury Department announcement said.
The new rules would ask platforms that facilitate the buying and selling of digital assets, also known as crypto brokers, to track and report key information—as stock and bond brokers currently do.
The proposed rules would also target decentralized exchanges (DEXs). Such crypto exchanges do not collect customer data and require no personal details from users—unlike Binance or Coinbase.
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Kristin Smith, executive director of the Blockchain Association, tells Decrypt's Dan Roberts and Stacy Elliott in our Decrypting Mainnet series at Mainnet 2022 that the crypto industry has "never been so close to getting some comprehensive legislation done" and that she's confident we'll see an actual crypto law by next year.
General counsel for Delphi Labs Gabriel Shapiro said on Twitter that the proposed rules "could be a devastating blow to the use of P2P protocols" in the U.S. as it would ask operators of such exchanges to collect data from users.
While Kristin Smith, CEO of Washington, D.C.-based nonprofit Blockchain Association, told Decrypt that "given the reporting requirements, a platform or protocol would need to centralize in order to comply, eliminating all benefits of decentralization including security and transparency."
Proposed treasury regs for crypto asset 'brokers' just dropped and do indeed explicitly characterize various persons involved in DeFi (including operators of websites that communicate with wallets) as brokers . I'll need to dig in more but it looks pretty bad. pic.twitter.com/uuc6LI3j5I
McHenry is vocal about the crypto industry and has clashed with Democrats over how to regulate the it. Last month, he urged a stablecoin regulation bill go ahead after it hit a wall due to criticisms from Democrats.
The proposed regulations are open for public comment and feedback until October 30.
Editor's Note: Post updated to add more recent comment from Kristin Smith.
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