Eminent U.S. senators are attempting to exempt Americans from having to track taxes every time cryptocurrencies change hands by introducing legislation that would exempt them from reporting any transactions worth less than $50 or any trade in which they earn less than $50.
Sen. Patrick Toomey (R-Pa.) joined Sen. Kyrsten Sinema (D-Ariz.) in advocating for a tax exemption for crypto users making small investments or purchases. Their Virtual Currency Tax Fairness Act is similar to one introduced previously in the House of Representatives. The concept of exempting low-level transactions from taxation has appeared elsewhere, including in a more extensive bill introduced this year by senators Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand (D-N.Y.)
While digital currencies have the potential to become an everyday part of Americans’ lives, our current tax code is impeding that, Toomey said. He has attempted to assist the crypto industry in a variety of ways before leaving the Senate at the end of this session.
The latest bill will make it easier for people to use cryptocurrencies as an everyday method of payment by exempting from taxes small personal transactions such as buying a cup of coffee.
The IRS has a firm crypto policy: “When you sell virtual currency, you must recognize any capital gain or loss on the sale,” the IRS states on its website.
That standard has been cited as one of the impediments to crypto’s use as an alternative payment method in the United States by industry advocates.
This would encourage the use of cryptocurrency for retail payments, subscription services, and microtransactions, said Jerry Brito, executive director of Coin Center, a Washington-based crypto policy think tank. More importantly, it would encourage the development of decentralized blockchain infrastructure in general, because networks rely on small transaction fees, which currently impose compliance friction on users.
The new legislation, however, faces an uphill battle in a Congress on the verge of a long August recess before the midterm elections. Though there has been some progress toward regulating stablecoins, most congressional insiders believe that significant legislation on crypto will not be passed until next year.
