Decoding the New Crypto Tax Legislation in the US: A Comprehensive Breakdown

In a significant regulatory move, the United States Internal Revenue Service (IRS) has unveiled a draft of proposed regulations on the sale and exchange of digital assets by brokerage entities. These new tax rules aim to streamline tax filings and impede tax evasion by bringing crypto asset reporting into alignment with other asset types.

According to the U.S. Treasury, the regulations, set to take effect in 2026, will reflect the sales and exchanges conducted in 2025. The IRS has opened up the draft for public commentary until October 30, 2023, with at least one public hearing scheduled to follow.

The proposed rules have sparked a wave of criticism in the crypto realm. Notably, Kristin Smith, the CEO of the Blockchain Association, underscored the vast differences that exist between the crypto ecosystem and the traditional financial system. In the same vein, DeFi Education Fund CEO Miller Whitehouse-Levine described the rules as “confusing, self-refuting, and misguided.” Additionally, Messari CEO Ryan Selkis went so far as to suggest that President Joe Biden’s reelection could spell doom for the future of the crypto industry in the US. Meanwhile, Representative Patrick McHenry, the Chairman of the House Financial Services Committee, declared the proposal as “another front in the Biden Administration’s ongoing attack on the digital asset ecosystem.”

In a related development, Gemini, a major cryptocurrency exchange, has filed a reply brief as part of its ongoing efforts to dismiss a lawsuit from the U.S. Securities and Exchange Commission (SEC). Gemini contends that the SEC’s claims lack clarity. The exchange further argues that the court should avoid the SEC’s “convoluted analyses” and instead, pose straightforward questions to determine if it classifies as a security. The SEC maintains that Gemini Earn, a service that allows customers to lend crypto assets like Bitcoin to Genesis, has violated securities regulations by offering unregistered securities.

On another front, a U.S. court ruled that art generated solely by artificial intelligence (AI) will not be eligible for copyright protection. This ruling comes amidst growing concerns about the potential of generative AI to replace human artists and writers, and the legal debate over AI companies using copyrighted content for training purposes.

Across the pond, the United Kingdom’s Treasury has issued a consultation paper as it prepares to ban finance-related cold calls. The paper seeks evidence to assess the full impact on businesses and the costs associated with introducing and implementing the ban. The consultation process will close on September 27, 2023.

In conclusion, the proposed crypto tax rules in the US represent a significant shift in the way the government views and handles digital assets. As the regulations evolve, it is clear that there will be further discussions and debates on how best to manage and regulate the rapidly growing and changing world of cryptocurrencies.