The White House's proposed update to digital asset rules would bring in more than $10 billion in new revenue over the next 10 years. Below are the details.
Fisrt, the Biden Administration projects $6.6 billion in revenue between the 2023 and 2032 tax years from applying mark-to-market rules to "actively traded" cryptocurrencies. Mark to market is a way of appraising the value of assets that takes into account current market conditions; it stands in contrast to using the purchase price of an asset, which may be higher or lower than its fair market value. In short, it's a way of taxing unrealized gains, which means the taxpayer is on the hook when ETH goes from $3,000 to $4,000—even if she doesn't sell.
Second, Uncle Sam seeks to increase revenue by requiring U.S. residents to report any holdings in offshore accounts above $50,000.
"The global nature of the digital asset market offers opportunities for U.S. taxpayers to conceal assets and taxable income by using offshore digital asset exchanges and wallet providers," says the Treasury. It thinks it can collect $2.2 billion over the next decade by tightening this reporting requirement. It means that Americans need to report and pay taxes when their crypto assets on foreign exchanges exceed $50,000.
Lastly, the administration wants U.S. banks and financial institutions to share information with the Internal Revenue Service about the value of holdings from non-residents and foreign owners of certain business entities. This impacts citizens and residents as well, according to Treasury, who "attempt to avoid U.S. tax reporting by creating entities through which they can act." It means that not only individuals are subject to tax on holding bitcoin, but corporate entities are also subject to tax on holding bitcoin.
Writes Treasury, "To combat the potential for digital assets to be used for tax evasion, third party information reporting is critical to help identify taxpayers and bolster voluntary tax compliance." The administration projects $2 billion in additional revenue over 10 years from applying this measure.
There's one other change the administration is looking to make, though it's not claiming an increase in revenue from doing so. It thinks crypto loans should follow the same rules as other lending markets.
At this stage, the budget is just a proposal for changes that would go into effect on January 1, 2023. Over the coming six months or so, Congress and the administration will hash out the particulars.
In terms of price, the current price of BTC is around $48000. Since May 2021, the price of BTC has been adjusted for nearly one year. At present, the market value has shrunk by 30% compared with the highest in history. It is expected that from 2023, the tax may affect investors, especially the main force holding high market value funds. Only from the perspective of the expected impact of tax, it is still a favorable period for the price rise of BTC and other cryptocurrencies.
