In a recent speech outlining his economic plan, US President Joe Biden reaffirmed his commitment to making the tax system fairer by eliminating loopholes that allow crypto traders and hedge fund managers to evade taxes. This move addresses an estimated $18 billion in lost tax revenue, signaling the government’s intention to crack down on tax evasion within the crypto industry.
President Biden’s statement follows his previous tweets in May, urging Congress to close tax loopholes benefiting wealthy crypto investors. The proposed changes are expected to target practices such as crypto wash trading, where traders sell investments to incur tax-deductible losses before reinvesting. This strategy, currently not covered by existing regulations, allows traders to avoid higher tax rates applied to traditional equities.
While these remarks caused a temporary dip in Bitcoin’s value, the market quickly rebounded, with the cryptocurrency falling 1.3% to just under $30,000. Bitcoin, the largest digital asset comprising over half of the crypto market, has since rallied back above $30,500, demonstrating its resilience amidst regulatory scrutiny.
President Biden’s stance against crypto tax loopholes aligns with the actions of his appointed Securities and Exchange Commission (SEC) Chairman, Gary Gensler. Under Gensler’s leadership, the SEC has intensified its crackdown on digital assets, as evidenced by recent lawsuits filed against major exchanges, Binance and Coinbase, for offering unregistered securities.
Furthermore, the crypto industry has witnessed notable developments that have contributed to Bitcoin’s resilience and market growth. Despite regulatory concerns, Bitcoin reached a 52-week high above $31,000 following BlackRock’s application for a spot Bitcoin ETF. This move by BlackRock, the world’s largest asset manager, was followed by similar applications from firms like WisdomTree and Invesco. Additionally, reports suggest that Fidelity is preparing to file for its own spot Bitcoin ETF.
Investor confidence in digital assets has remained strong, as nearly $200 million worth of inflows poured into digital asset investment products last week. This represents the highest weekly inflows in nearly a year, according to a report by CoinShares. These developments demonstrate the increasing institutional interest in cryptocurrencies, despite the ongoing regulatory discussions and potential tax reforms.
As President Biden’s campaign gains momentum, his promise to eliminate crypto tax loopholes will likely be a focal point. Throughout his campaign trail, he is expected to provide further details on his plan to address tax evasion within the crypto industry.