According to recent reports, Joe Biden, the reigning President of the United States, has released a $6.9 trillion budget forecast for 2024. In addition, the Treasury Department has proposed imposing a 30% consumption tax on bitcoin mining electricity costs.
Furthermore, the Department of Treasury document clarified that the projected consumption tax on bitcoin mining businesses’ electricity supply expenses would be phased in over a three-year period beginning after December 31. The tax rate would begin at 10% in the initial year and rise by 10% each year thereafter, reaching a maximum of 30% by the conclusion of the third year.
Treasury justifies crypto tax to protect the environment
The Treasury Department justified the levy on the grounds that cryptocurrency mining consumes a lot of energy, which has negative consequences for the environment. Notably, there are dangers and ambiguities for local utilities and communities due to the enormous energy demand of these operations, which can lead to higher expenses for people who share the same power grid.
As a result, the mooted consumption tax on the power generation costs of bitcoin miners seeks to address these challenges and stimulate the use of renewable energy sources.
White House considers scrapping crypto tax scheme
Further, on March 9, the White House declared in a pronouncement that it is considering abandoning a tax scheme for crypto transactions that it estimates could raise $24 billion. Presently, virtual currency traders can dispose of their online currencies at a deficit for tax reasons and instantly repurchase those cryptocurrencies, a technique known as tax-loss harvesting.
The new regulations would harmonize the tax treatment of cryptocurrency trading with that of equities, whose wash sale laws also restrict such dealings. The action is an attempt to avoid tax evasion techniques like wash trading and ensure that all cryptocurrency investors are treated fairly when paying taxes.
Ensuring Fair Taxation: Proposed Regulations for Cryptocurrency Trading
On the same accord, U.S. Treasury officials have recommended revising securities loan nonrecognition regulations to cover loans of actively traded virtual currencies documented on distributed ledgers.
In other words, the proposed amendment aims to expand the scope of the current securities loan nonrecognition laws to cover loans of cryptocurrencies and other digital assets that are actively traded on blockchain networks. The statement from the Treasury Department also stated that the terms of these loans must be the same as what is now mandated for securities loans.
The Treasury Department’s action is being rationalized as a move toward greater regulation of the cryptocurrency business and more excellent compatibility with conventional finance.