Home / News / Crypto / News / Crypto Tax Rules: Lawmakers Label Treasury Plans “Dangerous [With] Improper Overreach.”
4 min read

Crypto Tax Rules: Lawmakers Label Treasury Plans “Dangerous [With] Improper Overreach.”

Last Updated November 16, 2023 11:37 AM
Teuta Franjkovic
Last Updated November 16, 2023 11:37 AM

Key Takeaways

  • A bipartisan group of U.S. lawmakers is urging the Treasury to revise its proposed digital-assets taxation regime.
  • The lawmakers’ letter highlights the crypto community’s opposition.
  • The Treasury is expected to release a finalized version of the crypto tax rules in the coming months.
  • Members of the House Financial Services Committee clashed over how cryptos are used in illicit financing.

In August, the U.S. Department of the Treasury and IRS unveiled proposed regulations for tax reporting  for cryptocurrency, non-fungible tokens, and other digital assets. The proposed rules aim to bring transparency and accountability to the crypto space, requiring brokers to report digital asset transactions to the IRS.

Now, a bipartisan group of U.S. lawmakers is urging the Treasury  to reconsider its proposed taxation framework for digital assets, aligning with concerns voiced by crypto representatives and legal experts who view the suggested tax scheme as a “dangerous and improper overreach.”

Bipartisan Lawmakers Challenge Proposed Crypto Taxation

Led by Chairman of the House Financial Services Committee Patrick McHenry (R-NC) and Congressman Ritchie Torres (D-N.Y), a coalition of nine lawmakers, including both Republicans and Democrats, is challenging the described tax reporting requirement, deeming it “unworkable.”

Congressman Torres did not immediately respond to a request for comment.

In an announcement on Wednesday , November 15, the group expressed their reservations, stating that if the proposed regulation is finalized, the expansive definition of a digital asset “Broker,” the inadequate definition of a “Digital Asset,” and the notably brief comment period could potentially hinder a significant portion of the digital asset ecosystem from thriving in the United States.

The announcement unveiled a letter  dated November 10, addressed to U.S. Treasury Department’s Assistant Secretary Lily Batchelder.

The crypto tax rule, introduced in August , underwent a public comment period that concluded on Monday, November 13, accumulating over 124,000 comments. During a recent audio-only hearing, industry queries hinted at the possibility of revising the tax proposal. A finalized version is anticipated to be months away, with expectations of addressing some of the industry’s concerns.

The primary contention revolves around how the proposal categorizes hosted wallet providers, payment processors, select decentralized finance (DeFi) entities, and others as “brokers” for tax reporting purposes. The lawmakers’ letter argues that the definition of a “Broker” remains overly broad and could encompass entities lacking the traditional characteristics of a broker, raising significant concerns within the digital asset community.

Usage of Cryptocurrency In Terrorist Financing

On Wednesday, the Subcommittee on Digital Assets, Financial Inclusion, and Inclusion within the Financial Services Committee also organized a hearing  titled “Crypto Crime in Context: Analyzing Illicit Activity in Digital Assets.”

The hearing coincides with a bipartisan letter  sent by 57 members of Congress to President Joe Biden and Treasury Secretary Janet Yellen on Wednesday, November 15. The letter requests more information regarding the funding of Hamas and the role of cryptocurrency in financing their operations.

“It’s critical for Congress to understand the true extent of the use of digital assets for illicit purposes. In light of conflicting reports regarding Hamas’ fundraising efforts through digital assets, we are commencing a bipartisan fact-finding mission,” McHenry stated 

Hamas’s fundraising efforts and the use of cryptocurrency in such financing have become a major topic of discussion in Washington.

Lawmakers from both parties have expressed concern  about Binance and Tether’s possible role in providing material support and resources to these types of organizations.

They also called for a better understanding of how Hamas and other such organizations are using digital assets to fund their operations.

A hearing on cryptocurrency and illicit activity is scheduled to be held next week by the House Financial Services Committee’s digital assets panel.

“Terrorism financing is unacceptable no matter what form it takes,” said Rep. Hill, who chairs the panel.

“Congress must better understand how groups like Hamas use digital assets to fund their operations and cut off all avenues for this illicit activity, but also recognize that bad actors are the problem—not crypto,” he added .

Was this Article helpful? Yes No