Washington, May 21, 2021: In a bid to raise revenue for the $1.6trillion spending proposal to expand educational and social protection, as a part of the American Families Plan, the US treasury department has said that there should be a tax on transfers of cryptocurrencies between businesses.
The idea is to tax the wealthy and would require businesses that receive crypto-assets worth $10,000 and over in fair market value to report the transaction to the Internal Revenue Service, the federal tax authority. Other payment services and accounts that use crypto assets will also be required to do the same.
While outlining the proposal, the Treasury explained how even though today the proportion of cryptocurrency-based transactions is small in terms of business income today, but in the coming years, it is likely to rise in importance hence a financial account reporting regime is vital. This proposed tax on cryptocurrency transfers is part of a larger bid by the treasury to close the gap of what the government is owed and what it actually receives in form of taxes. In 2019, this gap stood at $600billion and is likely to grow to $7 trillion over the coming decade, hence measures are required to address it.
President Joe Biden has unveiled two massive spending programs since coming into office, one of which is the American Families Plan and the other is the American Jobs Plan. The aim of the proposals is to revamp public infrastructure. The slim margin that democrats have in the Congress over the Republicans means Biden is under pressure to find ways to pay for the projects to attract Republican votes.
Cryptocurrencies such as Dogecoin and Ethereum have surged in popularity recently, in part thanks to the coronavirus pandemic disruptions in the economy, prompting the Federal reserve to think about launching its own US-backed digital asset cryptocurrency. The Fed will publish a white paper discussing the importance and impact of such a decision. Jerome Powell, the Fed chair commented saying, “We think it is important that any potential (central bank digit currency) could serve as a complement to, and not a replacement of, cash and current private-sector digital forms of the dollar, such as deposits at commercial banks.”
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