Curbing Crypto Wash Sales, Spiking Capital Gains Among Biden’s Budget Proposal: Report

Around 20 percent population in the US currently hold cryptocurrencies, aiming to challenge the financial inequality prevailing there.

Written by Radhika Parashar, Edited by Siddharth Suvarna | Updated: 9 March 2023 13:50 IST

Curbing Crypto Wash Sales, Spiking Capital Gains Among Biden’s Budget Proposal: Report

Photo Credit: Unsplash/ Ewan Kennedy

The speculations around Biden’s plans has shaken up the crypto market

Highlights

The US Budget will be announced on Thursday, March 9
The changes in US’ tax regime around crypto could bring in funds
The US could also hike taxes for wealthy crypto holders

The US, that is set to get its annual budget on Thursday, March 9, is expected to see some changes in which the nation's law oversees the crypto sector. US President Joe Biden could be zeroing-in on clamping down crypto wash sales. In addition, the speculated rules could also include the decision of amending the existing crypto tax treatment in the US. The crypto culture seems to have picked up steam in the US in recent years with more retailers warming up to the idea of accepting payments in crypto.

As part of the annual budget announcement, the US authorities could reportedly propose to end the ‘tax-loss harvesting' strategy for crypto traders. This would prevent crypto owners to ‘wash trade' their assets at reduced prices before immediately repurchasing them for tax purposes.

In the US, crypto is identified as a property, and not currency. The US Internal Revenue Service (IRS) currently levies a tax reportedly between 10 to 20 percent on crypto transactions in the USA.

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Biden's upcoming budget announcement could further explore the idea of doubling the capital gains tax rate for investors. This could mean that long-term crypto holders with a portfolio of over $1 million (roughly Rs. 8 crore) could be asked to pay a higher tax of around 39.6 percent.

These changes around dealing with crypto in the US could trigger tremours for the crypto sector in the days to follow. In the backdrop of these speculations, the crypto market valuation tumbled down from its trillion-dollar valuation on Thursday, with majority cryptocurrencies including Bitcoin and Ether recording lowest prices in weeks.

Biden proposing to double capital gains taxes from 20 to 40% and not allowing for tax loss harvesting on #bitcoin .... WTF... pic.twitter.com/SnJNglpoAA
— Lark Davis (@TheCryptoLark) March 9, 2023

A Bloomberg report has claimed that the US government could end up spiking the income levied on wealthy American citizens as well as corporations.

Post COVID-19, the inflation rate in the US is currently at 6.41 percent, compared to 6.45 percent last month and 7.48 percent last year as per Ycharts.com. This is higher than the long term average of 3.28 percent.

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In order to stabalise this financial disbalance, Biden could be looking at bringing in around $3 trillion (roughly Rs. 1,63,84,100 crore) via different policy reforms in the coming years. Amending crypto tax laws could contribute over $24 billion (roughly Rs. 1,96,700 crore) to the US economy, The Wall Street Journal said in a report.

The crypto industry in the US is in the midst of a boom. Around 20 percent population in the US currently hold cryptocurrencies. The reason why Americans are investing in crypto assets is to challenge the financial inequality that prevails in the US, claimed a recent study by business intelligence firm Morning Consult.

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Further reading: Cryptocurrency, Joe Biden, Crypto Wash Sales, US Budget

Radhika Parashar

Email Radhika

Radhika Parashar is a senior correspondent for Gadgets 360. She has been reporting on tech and telecom for the last three years now and will be focussing on writing about all things crypto. Besides this, she is a major sitcom nerd and often replies in Chandler Bing and Michael Scott references. For tips or queries you could reach out to her at RadhikaP@ndtv.com. More