Congress Calls for Urgent Tax Regulations on Cryptocurrency to Tackle Compliance Issues

Introduction: The Call for Compliance

In a bold move, two members of the United States Congress have taken decisive action to tackle what they describe as the crypto industry’s ongoing tax evasion issue. U.S. Representatives Brad Sherman and Stephen Lynch recently reached out to Treasury Secretary Janet Yellen and IRS Commissioner Daniel Werfel, stirring the pot on a topic that has generated significant debate in recent years.

The Tax Gap: A Chasm that Needs Bridging

As it stands, lawmakers argue that the cryptocurrency sector has become a notorious sanctuary for tax evaders, contributing heavily to the nation’s widening tax gap. In a letter dated June 5, Sherman pointedly stated, “For years now, that industry has been a major source of tax evasion and a significant part of the nation’s tax gap.” But what does this mean for ordinary taxpayers? It implies that as some players play by their own rules, the rest of us might be footing the bill.

Back to the Future: Previous Warnings

The push for regulation isn’t wholly unexpected. An audit report dating back to September 2020 from the Treasury Inspector General for Tax Administration revealed that the IRS struggles to find cryptocurrency taxpayers due to insufficient reporting practices. One can only wonder how many NFTs out there are secretly funding someone’s Florida beach house.

Infrastructure Investment and Jobs Act: The Call for Reporting

Let’s not forget that the Infrastructure Investment and Jobs Act signed by President Biden in November 2021 was meant to pave the way for increased transparency in crypto transactions starting this year. Yet, as the representatives lamented, “the proposed regulations have yet to be promulgated.” Waiting on regulations for a compliance-heavy industry is a bit like waiting for the next season of your favorite show; it just feels like an eternity.

Adding Salt to the Wound: The DAME Tax

As if the news couldn’t get more contentious, earlier in May, the Biden administration reignited discussions surrounding a 30% Digital Asset Mining Energy (DAME) tax. This proposal raised constituents’ eyebrows and heightened discussions about tax equity in the crypto space. Although it didn’t make it into the latest legislation regarding the U.S. debt ceiling, many are concerned that it’s only a matter of time before it resurfaces like a pesky fruit fly.

The Crypto Community’s Response: A Divide in Opinions

While some members of the crypto community view the tax proposals as a precautionary step toward compliance, others remain skeptical about the government’s intentions. Nic Carter, co-founder of CoinMetrics, expressed concern that the DAME tax might still haunt cryptocurrency miners like the ghost of taxes past. This divide in opinion raises the question: Are these regulations an effort to modernize tax compliance, or just another layer of bureaucratic red tape?

Conclusion: What Lies Ahead?

The bipartisan urging from Sherman and Lynch signals a crucial juncture for cryptocurrency regulation in the U.S. As they push for prompt responses from the Treasury and IRS, ordinary taxpayers will watch closely, hoping that any changes lead not to more chaos but to greater clarity and control in the extensively opaque world of digital assets.