The 2023 American Investment and Employment Act, of which the Treasury Department’s proposed cryptocurrency tax reporting requirements are a part, was approved by President of the United States Joe Biden on March 8, 2023.
The new regulations, which still need congressional approval, would call on cryptocurrency exchanges and other trading platforms to report the bitcoin transactions of their users to the IRS. Additionally, they would mandate that cryptocurrency users record their earnings and losses in their tax returns.
The proposed guidelines have elicited a range of reactions from the crypto community. The laws have received some community members’ approval, with some saying they will help ensure that every taxpayer pays their fair taxes. Other community members have expressed worries about the restrictions, claiming that they are overly complicated and may deter people from making cryptocurrency investments.
Adherence to the laws
The rules’ proponents contend that they are required to guarantee that all taxpayers pay the appropriate taxes on bitcoin gains. They note that cryptocurrencies are a growingly popular form of digital currency and that, in order to stop tax fraud, the government needs to be able to track cryptocurrency transactions.
John Collins, the Director of the Internal Revenue Office at the Department of the Treasury, stated that these regulations are a crucial step in ensuring that all taxpayers pay their fair taxes on cryptocurrencies. Cryptocurrencies are a digital asset that is becoming more and more popular, so it’s critical for the government to be able to trace cryptocurrency transactions in order to stop tax fraud.
The rules’ proponents also claim that they may help shield investors from fraud. They point out that because cryptocurrencies are a very new and complicated type of digital currency, it’s critical for investors to be aware of the risks involved in making cryptocurrency investments.
Former US Court of Appeals for the Fifth Circuit judge Susan Webber Wright stated that these regulations “could help protect investors from scams.” “Cryptocurrencies are a new and complex form of digital asset, so it’s crucial for investors to understand the risks involved with making investments in cryptocurrencies.”
Worries regarding the laws
Critics of the regulations contend that they are overly complicated and would deter consumers from making cryptocurrency investments. They draw attention to the fact that the regulations would call on cryptocurrency users to keep thorough records of their transactions, which could be time-consuming and expensive.
The CEO of Messari, Ryan Selkis, remarked, “These rules are too complicated.” Users of cryptocurrencies would have to keep meticulous records of their transactions, which may be time-consuming and expensive.
The guidelines’ detractors claim that they would discourage consumers from making cryptocurrency investments. They assert that the regulations may reduce investors’ interest in cryptocurrencies by raising the price and complexity of cryptocurrency investment.
According to Brian Armstrong, CEO of Coinbase, “These regulations may deter people from investing in cryptocurrencies.” They “could make investing in cryptocurrencies less appealing to investors by raising the cost and complexity of doing so.”
Possible effect
The proposed rules may have an unknown effect. The regulations may help guarantee that all taxpayers pay the correct taxes on their cryptocurrency gains. They might, however, deter some people from making cryptocurrency investments.
How the proposed rules would affect the crypto community won’t be known for sure for some time.
