Unlike any other national currency, Bitcoin and other crypto currencies, being considered investment instruments, create a taxable event in terms of capital gains tax after each transaction they are being used to pay for.
Congress Busy Dealing with Crypto Currency Agenda
The introduction of the ‘‘Virtual Currency Tax Fairness Act of 2020’’ by its sponsors, Rep. DelBene, Schweikert, Emmer and Soto, aims at solving this problem by leveling the playing field and treating crypto as any other currency by implementing de minimis exemption from capital gains tax for crypto currency everyday transactions, up to a certain threshold, and thus stimulate a broader use of the technology.
The 2020 crypto agenda in Congress started with The Safe Harbor for Taxpayers With Forked Assets Act Virtual Currency Tax Fairness Act,, introduced by Rep. Emmer, a co-chair of the Congressional Blockchain Caucus Virtual Currency Tax Fairness Act, to provide a safe harbor from penalties for taxpayers that benefit from hard forks and make all efforts to comply with IRS, but due to the unclear guidance surrounding taxation on gains from hard forks in a block-chain, they may have failed to do so.
It continued later on by the actions of several members of Congress who asked the IRS to fix the issues regarding forks and airdrops, and the recent re-introduction of the crypto tax act wrapped up a significant period of activities that may prove vital for the further use and development of crypto currencies.
What Lies at the Heart of the Matter?
The issue this act tackles is to remove the need for every Bitcoin and other crypto currency user that uses the virtual means of payment for everyday purchases, to account for the difference between the market price at the moment of purchase and the price at which the crypto currency has been acquired, as paying with Bitcoin is essentially treated as sales of Bitcoin.
With the huge daily fluctuations, of the market price of the crypto currencies,, this turns out to be a Gargantuan task for the common user who is left with one of two options: not comply , with capital gains tax regulations or not use Bitcoin for everyday purchases at all, and places Bitcoin and the rest of the crypto currency company at a significant disadvantage, compared to the national currency.
Bitcoin One Step Closer to Everyday Use
Though the amount for de minimis exemption, has been reduced from previous $600 to $200 in the current version of the act, the latest re-introduction of the Virtual Currency Tax Fairness Act shows there is a new understanding among legislators about the broader role of crypto currencies and blockchain technology in everyday life of the American taxpayer.
