Cryptocurrencies are a revolutionary currency that has changed the way we think about money and the global economy. However, along with popularity comes criticism, and lawmakers are taking stock of the impact of unregulated currency on the economy and personal finance.
One of the main selling points of cryptocurrency for investors is that it's unregulated. Despite being a global currency, crypto has no government interference – this is good and bad.
The good thing about unregulated currency is that there aren't rules about how it can be spent or limits on its value. The bad thing about unregulated currency is that there's no Federal Reserve to make more if the prices get too high. There's also no way to tell how cryptocurrency affects the economy – an unknown that makes many lawmakers nervous.
There are currently two camps in Washington: those who see integration as an opportunity for unmatched growth and those concerned about the implications of an industry that lends itself to bad actors.
The Biden administration has been carefully evaluating the crypto industry in an effort to begin setting boundaries for the industry and bring it under the watchful eye of regulators. At this point, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are the regulatory agencies most likely to take charge of cryptocurrency in the United States.
Neither agency will fully regulate crypto and act as a watchful eye to ensure that bad actors aren't interfering with the market. This is the primary concern for members of the other camp: the skeptics.
Crypto skeptics are worried that integrating an industry that allows people to spend money on the dark web without a trace could jeopardize the economy. Regulations give us an expectation of the outcome, and crypto has no rules, so there's no way to tell where the industry is headed.
Both sides are proceeding with caution as discussions over supervision and regulation continue in Washington.
Another point of contention over cryptocurrency is taxation: how is income from crypto taxed, and how would regulation affect that?
The Internal Revenue Service (IRS) treats income from cryptocurrency investments the same way as normal investments. Your yields are calculated into your yearly income, which is subject to income tax. Of course, this is an oversimplification of the process, but generally speaking, crypto money is considered supplemental income.
However, it's important to understand that tax law related to cryptocurrency is extremely complicated, and a tax attorney should address any questions or concerns.
For companies like Bitcoin, the tax process won't be so simple anymore. Prior to this year, lawmakers weren't sure how to tax cryptocurrency giants but will change thanks to a vote in favor of a bill called the Infrastructure Investment and Jobs Act. This law will limit the financial freedom companies like Bitcoin have and institute new tax regulations and reporting requirements.
Contact Buchalter & Pelphrey Attorneys At Law for legal guidance regarding crypto taxes.