Crypto-Tuesday March 7. 2023 – Cryptocurrency has emerged as a popular form of investment and a means of trade. The US government has been increasingly cracking down on the use of cryptocurrencies, with various agencies taking steps to curb their use.
Today we will explore how US agencies are killing cryptocurrency in the US and the impact it may have on the future of digital currencies.
One of the most significant moves against cryptocurrencies in the US was made by the Internal Revenue Service (IRS) in 2014. The IRS declared that cryptocurrencies should be treated as property for tax purposes, which meant that any gains from the sale of cryptocurrencies would be subject to capital gains tax.
This was a major blow to cryptocurrency investors, who had previously enjoyed tax-free gains from their investments. The decision by the IRS to tax cryptocurrencies has made it more difficult and costly for individuals to trade in digital currencies.
The Securities and Exchange Commission (SEC), under Chairman Gensler, has taken legal action against cryptocurrency companies. Going so far as to say that “everything but Bitcoin” should be considered a security and regulated as such.
The ongoing legal battle between the SEC and Ripple may decide the fate of the entire crypto industry and whether many cryptocurrencies survive. Ripple CEO Brad Garlinghouse has said Crypto companies have “already started moving outside” the US to avoid the heavy hand of the SEC.
More recently, the US Treasury Secretary, Janet Yellen, said it was “critical to put in place a strong regulatory framework.“ While she stopped short of calling for a ban on Cryptocurrencies, there have been very powerful forces stating that banning crypto should be an option.
And today, Federal Reserve Chairman Jerome Powell, restated his heavy warnings to banks that the Federal Reserve are watching their Cryptocurrency moves closely. Saying, “We see in crypto activity lots of things that suggest that regulated financial institutions should be quite cautious in doing things in the crypto space.”
Some experts believe that cryptocurrencies will continue to thrive despite the increased scrutiny, while others believe that they will struggle to gain widespread adoption if they are subject to onerous regulations. In any case, the US government’s increased scrutiny of cryptocurrencies has had a significant impact on the industry.
The tax treatment of cryptocurrencies, along with proposed regulations from a host of United States Government Regulatory Agencies, including, the IRS, the SEC, the Department of Treasury, the Federal Reserve Board, and others, have made it more difficult and costly for individuals to trade in digital currencies. While some argue that this regulatory crackdown is necessary to prevent illicit activities, others worry that it will stifle innovation and prevent the growth of this possibly freedom enhancing technology.
Attorney Steven A. Leahy looks at the regulatory landscape in this Crypto-Tuesday episode of Today’s Tax Talk.