President Biden has implemented new tax reporting regulations on crypto holders, and the reasons behind the proposal have got people asking questions.
It’s not unheard of for governments to begin building regulations and legislation for crypto use. Much of Europe and Asia have already implemented scaffolding for these types of digital currencies, specifically as more of their citizens begin to embrace the idea of owning digital currencies. Bitcoin has become more than famous in the last 5 years, reaching the status of being a household name. As few are left who have never heard of the coin, whether or not they invest in it themselves. In recent years, particularly since the beginning of 2020, other coins have also started to make a name for themselves.
Which seems to have only compelled governments to sit up and take notice of the cryptocurrency movement, no longer able to dismiss it as a passing fad. This widespread adoption and familiarity— that only seems to garner even more attention from younger generations— is beginning to look more like the future of currency, and less like an alternative and niche payment paradigm.
New proposals for reporting
President Joe Biden announced his 2022 budget proposal last month, and certain new considerations are beginning to cause a stir. More than just the usual, Dem v. Republican, Left v. Right, issues— it was his inclusion of cryptocurrency policy that had people on both sides of the fence on tenterhooks. Whether you are for or against or in favor of buying crypto, know little about them, or are incredibly crypto savvy, chances are governments looking to wield legislation on the digital currency realm will definitely strike some manner of reaction in you.
This is largely because it signals two important things for cryptocurrencies and the people that use them: firstly, that governments are now pushing for regulation which could mean that massive spikes in adoption and bullish sentiment from even the coins biggest detractors are on the rise, and secondly— that a centralized authority is now looking to place rules and restrictions on a staunchly decentralized market. Which could be cause for rejoice, or concern, depending on which camp you fall into.
As far as the proposed policy, President Biden made two inclusions regarding cryptocurrencies, the first having to do with broker reporting guidelines in respect to crypto assets, and the second concerning reporting rules for financial institutions; requiring them to report any data on their customers that make any transfer above $600 for tax purposes. Mostly notably transfers that are made to crypto asset exchanges and custodians.
Why step up now?
When these new practices fall into place on Dec. 31, 2022, it could create new headaches and frustrations for anyone involved in finance— digital or otherwise— and suggests a tightening grip on the government’s control of what consumers do with their money and the data that trails in its wake. Which is most likely in response to more institutional interest being held in cryptocurrencies, particularly Bitcoin.
In fact, the White House’s own technology advisor, Tim Wu owns millions of dollars’ worth of Bitcoin. As a recently filed financial disclosure from the antitrust expert and White House official states this as well as other crypto holdings, which could total above $5 million. Users of this stature and notoriety aren’t waning either, with several other huge names in America’s financial world reporting that they too own millions of crypto, and have no plans of dropping it. Situations such as these have caused the American government to hastily begin to construct regulations for the digital currencies, reportedly in order to deter off-shore tax evasion, which the Treasury Department was quoted as saying “… is a rapidly growing problem.”
Adoption rates soar as prices stabilize
Cryptocurrencies, most notably Bitcoin, have been slowly gaining traction over the last decade or so— with massive adoptive gains seen in the last two years. Some experts believe that adoption trends are mirroring that of the internet and if they do, then the world could be fully digital by 2030. Which means that governments need to start stepping up in order to accept the change that seems imminent.
The internet, first dispersed in 1995, didn’t see massive adoption until 2000. However, once mass adoption took hold, the tell-tale hockey stick emerged. To the point where now— nearly everyone has internet access, and most would consider a life without it roughly unthinkable. This massive upshot in adoption leaves graphs looking a bit like a hockey stick (hence the name), where there is slow adoption cover a long period of time, but then suddenly— everyone seems to get on board all at once. This is the sort of adoption that many experts expect Bitcoin and other cryptos to see once the appropriate rules, channels, and systems are in place.
A massive deterrent to the initial adoption of the internet had many similar attributes: struggles with scalability, legal grey areas, and issues regarding security and personal safety were rife with early adopters. All things that the World Wide Web had to contend with in order to really become the overall disruptive force that it is today. Cryptocurrencies will be no different, as they currently contend with many of the same problems, problems that should see themselves right in the near future— clearing the way for more than just governments to get comfortable with them, but all people, all over the world.
Story by Hannah Madison