U.S. Digital Asset Taxes Estimated to Reduce Federal Budget by $1 Trillion Following 2023 Budget Report
The U.S. and Biden administration have recently made significant moves regarding the digital asset space.
Biden signed the executive order earlier this month, asking the government to analyze digital assets’ potential risks and benefits. The order focused mainly on consumer protection, financial stability, illegal activity, U.S. competitiveness, financial inclusion, and responsible innovation.
Also of note was the order’s statement to federal agencies, requesting the regulation of digital assets within the country to be considered.
The Biden administration is also looking into a digital version of the dollar and has called on the Treasury to assess and create policy recommendations regarding digital assets.
Since then, the Biden administration has released its budget for 2023. Released on March 28th, the U.S. budget highlights newly implemented digital asset tax provisions. These taxes apply to institutions, brokers, miners, and any other digital asset-related business practices, which are now required to report earnings to the Internal Revenue Service.
Details on the U.S. Budget Expanded
Due to these new tax requirements, the government estimates to reduce the federal budget deficit by more than $1 trillion over the next decade.
Reports also state that the document recommends that laws surrounding taxpayers who trade or deal with digital assets full-time should be altered. The total revenue raised by these changes is estimated to reach $11 billion between 2023 and 2032, with almost half expected for next year alone.
The White House is also requesting that rules surrounding digital assets be modernized. The modernization of these rules will start by expanding tax reporting requirements for digital assets, bringing more than $10 billion in new revenue over the next ten years.
An additional $52 billion in funding was noted due to the Department of Justice’s decision to hire more agents and analytical capabilities as part of “the Administration’s counter-ransomware strategy that emphasizes disruptive activity and combatting the misuse of cryptocurrency.”
Also, the Treasury announced its strategic plan for the next four years that emphasized the role of the Financial Stability Oversight Council (FSOC). The Treasury’s plans look to expand FSOC’s role in digital assets, stating “New and growing threats to financial stability addressed, with a focus on risks from climate change and digital assets.”
While the general message of the budget goes over the government’s views and plans for digital assets, it also, once again, states the desire to provide additional security. To further emphasize this, the U.S. government is looking to spend an additional $52 million to increase the efforts against cyber threats, such as ransomware and the misuse of digital assets.
The document stated that the funding would be directed to the Department of Justice and “enhanced response capabilities and analysis capabilities” by hiring more FBI agents. They elaborated further by saying, “These investments are in line with the administration’s counter-ransomware strategy that emphasizes disruptive activity and combating the misuse of cryptocurrency.”
How Taxes Will Affect Digital Assets Going Forward
These new rules have citizens reporting their digital asset incomes, with exchanges also likely having to report customer trading activities. Americans are now required to register any holdings in offshore accounts that exceed $50,000.
The Treasury released a statement going into further detail: “The global nature of the digital asset market offers opportunities for U.S. taxpayers to conceal assets and taxable income by using offshore digital asset exchanges and wallet providers.
The Biden Administration is to apply a “mark-to-market rules” to “actively traded” digital assets, meaning that current market conditions will determine the value of an asset.
With the market cap of digital assets sitting about 2 trillion, becoming an exceptionally profitable source of revenue for the government, it is unlikely that a major shift in the form of regulatory clampdowns will occur, even as this new tax revenue starts to accumulate.
Writer, content marketing at Netcoins.