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Thursday, June 6, 2024

US Senators’ proposed crypto bill doesn’t give a hoot about home mining rigs

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US Senators Lummis and Gillbrand have introduced a potential bill for the regulation of the ever-growing cryptocurrency industry: the Bipartisan Responsible Financial Innovation Act.

The bill focuses on “Flexibility, innovation, transparency and consumer protections in order to integrate digital assets into existing law and provide certainty to the growing industry.” The purpose of the bill seems to be, then, to simultaneously reign in the decentralised industry, while creating greater protection for consumers and safeguarding the innovation of the digital asset market.

It addresses both Stablecoin Regulation and Tax Treatment Of Digital Assets, among other things. Not only does the bill suggests definitions for crypto related concepts—i.e. digital assets, payment stablecoins, etc.—it also outlines potential regulations around the trading of cryptocurrencies, and how crypto businesses are defined.

Basically, its aim is not to stifle the evolution of the crypto market, but you can be damn sure the US Government is going to take its fair share of taxes.

That said, there’s a proposed “De Minimis Exclusion of up to $200 per transaction” when digital currency is used to pay for goods and services, “under specified conditions.” Translated literally from the puffed out Latin version of ‘De minimis,’ it means “the law does not concern itself with trifles,” which is my new favourite way of saying “I’ll leave that to you.”

What it all means is, if you’re only mining or trading a pittance of digital coinage, the US Government won’t give a hoot.

Of course, it’s the bigger fish the law is interested in. The bill makes sure to give a mention to the specification that Decentralized Autonomous Organizations (DAOs), big companies that trade in cryptocurrency, will need to be legally seen as business entities “for the purposes of the tax code.” 

So no dodging taxes just because your stocks are only meme coins.

There’s also a focus on defining cryptocurrencies as ‘ancillary assets’ or ‘commodities.’ In other words, they’ll be seen more as tangible goods like wheat or oil. That means cryptocurrency, as well as NFTs, would come under Commodity Futures Trading Commission (CFTC) governance, as opposed to Securities and Exchange Commission (SEC).

There was some previous confusion around this down to a tiff over which department would handle digital assets.

There’s also the suggestion, as Blockworks points out, that mining and staking activity revenue wouldn’t need to be included as part of gross income tax calculations until the assets are actually sold. Which makes sense if they’re being defined as commodities.

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What it could mean for the crypto market, especially in this time of a downturn in profitability, is unclear. We did see a significant tanking in crypto prices back in January 2018 due to fears that regulations would come in to stamp all over the decentralised market.

It’s true everyone seems to be jumping on the crypto bandwagon. The UK gorvernment even wants in on the crypto action. Since the world is in a current state of crypro-obsession, it makes sense that regulations are sure to follow, so it can be properly aligned with current law.

The bill itself (PDF warning) is a little wordy, so if that’s a little too much legalese for you to take in, it might be worth looking into the section by section overview (PDF warning) if you want to get a better idea of how it could affect any assets you’re currently HODLing.

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