TL;DR:
- President Biden claimed that getting rid of “tax loopholes that help wealthy crypto investors” would earn the government $18 billion, which has puzzled the crypto industry.
- Experts have argued that there is no such “crypto tax loophole” and that gains on transfers between asset types in crypto are taxed more heavily than other assets.
- The Biden budget forecasts that getting rid of the wash sale loophole for digital assets would bring in $23 billion over the next ten years, with $1.24 billion expected in 2024.
President Joe Biden’s recent tweet about cryptocurrency tax loopholes has sparked confusion and debate within the crypto industry. In the tweet, Biden claimed that the government could net $18 billion by getting rid of tax loopholes that benefit wealthy crypto investors.
However, many in the crypto industry were puzzled by the claim, with some denying the existence of such a loophole. Adam Cochran, a managing partner at Cinneamhain Ventures, challenged anyone to cite the supposed loophole, pointing out that cryptocurrencies are taxed more heavily than other assets on gains made from transfers between different asset types.
So where does Biden’s figure of $18 billion come from? It’s unclear, as nowhere else does the crypto tax loophole seem to amount to that much. The Biden budget has forecast that eliminating the wash sale loophole for digital assets will bring in $23 billion over the next decade, but in 2024, it’s expected to bring in only $1.24 billion.
In March, the Wall Street Journal reported that Biden proposed a change to how crypto transactions are taxed that would raise $24 billion. At the time, the administration said that crypto assets were not subject to the same wash trading rules that apply to stocks and bonds.
However, Bloomberg reported last week that crypto traders have still been avoiding billions of dollars in taxes by exploiting wild price swings and employing wash trade tactics. The National Bureau of Economic Research published a paper that suggested if traders had used these tactics in 2018 at the same scale they are now, the US Treasury would have lost a projected $16 billion.
We don’t have to guess what MAGA House Republicans value. They’re telling us. pic.twitter.com/BM6JGMEFeq
— President Biden (@POTUS) May 9, 2023
Joseph Abate, a researcher at Barclays, also estimated in a 2022 research note that the funding gap from unpaid taxes by crypto traders could amount to around $50 billion a year, based on a 2017 IRS calculation.
Biden’s tweet is not the first time he has drawn the ire of the crypto industry. He recently proposed a 30% tax on the cost of the electricity used by bitcoin mining, which was met with strong pushback from mining companies.
It’s unclear where the $18 billion figure comes from, and the White House did not immediately comment on Biden’s tweet. However, the debate surrounding the taxation of cryptocurrencies and their role in the economy is likely to continue, as governments seek to regulate and tax the rapidly growing digital asset market.
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