Two Senators Detail New Crypto Legislation To Create Capital Gains Tax Exemption

Senators Cynthia Lummis (R, WY) and Kirsten Gillibrand (D, NY) are proposing a tax exemption up to a certain level on capital gains on cryptocurrencies, under new legislation coming to regulate cryptocurrencies.

“We’ve come up with $600 to start with, but in particular we’re sharing our bill with a number of our constituents so we can get feedback,” Lummis said in an interview with Yahoo Finance. “Is $600 the right number?” Should it be higher given inflation and other factors? »

Unlike traditional classes, like stocks and bonds, the two senators believe that crypto should be given a capital gains tax pass up to a certain amount that allows for easy use.

“It’s not like owning a stock because you’re not using your stock portfolio to play an online computer game,” Gillibrand said. “Imagine a kid owning cryptocurrency in a game, and if they have $40 worth of cryptocurrency, you have to have a de minimis amount for the kid to not file tax returns.”

Gillibrand says blockchain technology creates a platform for multiple uses, from community organizing to investing in art, and allows NFTs to be traded and used as something of value that will remain a digital asset.

She says the technology must be usable for its purpose, and that crypto entities are not trying to be banks or brokers, but all different kinds of functions in financial services. Tax exemptions are just one of many elements of Gillibrand and Lummis’ crypto regulatory bill.

A TV screen is seen in a cafe which has dozens of screens showing the latest trends and prices on various cryptocurrencies (Reuters)

The bipartisan duo created a comprehensive bill offering a standard set of definitions for how cryptocurrencies should be regulated, whether as commodities or securities, as well as consumer protections, privacy, and rights. stable coins.

Senator Lummis claims that most cryptocurrencies are commodities, which would place them under the jurisdiction of the Commodity Futures Trading Commission for spot and futures trading. She says that for crypto products that are bundled into securities, they would have the so-called Howey test, a case law test that helps determine what a security is, which would fall under the Securities and Exchange Commission.

“We’re trying to create that opportunity to continue to innovate while more clearly delineating the rules of the game,” Lummis said.

The legislation also plans to protect users on exchanges from losing money in the event of a hack, turning to the SEC to enforce consumer protections on exchanges. SEC Chairman Gensler has encouraged crypto exchanges to register with the Commission.

Gensler warned that the SEC could take enforcement action if companies fail to comply, citing the example of how the SEC accused BlockFi of failing to register its retail crypto lending product earlier this year. The Commission also recently set new cryptocurrency accounting standards that would protect crypto assets held by companies for users against hacking losses.

Regulating stablecoins

When it comes to stablecoins, the senators believe that the Office of the Comptroller of the Currency would be the best regulatory body to oversee them. While the OCC is one of the nation’s top banking regulators, the senators don’t want to regulate stablecoins as if they were banks. They also don’t want to limit stablecoins to being banks only.

US Senator Cynthia Lummis (R-WY) gestures as she speaks at the Bitcoin 2022 conference (Getty Images)

“They don’t do the same things that banks do, and they’re not meant to be banks,” says Gillibrand. “We don’t want to create so much cumbersome infrastructure around it because it’s not necessary since the uses are very different. So let’s look at the stablecoin industry a bit more holistically.

Gillibrand says the senators don’t want to limit the market by creating the same regulatory limits for stablecoin banks, but instead want to provide flexibility that allows for innovation. The senators’ approach would not require deposit insurance, but instead would require stablecoins to maintain fully guaranteed reserves of 100% at all times.

Issuers would also have a direct line to the Federal Reserve, which crypto banks based in Lummis’ home state of Wyoming have struggled to achieve. The bipartisan senators’ approach contrasts with the president’s Task Force on Financial Markets, which recommends that only banks be allowed to issue stablecoins.

Republican Senator Pat Toomey is circulating a stablecoin oversight bill that would create a new federal license for stablecoins. This would still allow many existing stablecoin issuers to retain state-registered funds transmitter status as long as they are still subject to a set of federal oversight requirements.

“Delaying a CBDC”

When it comes to deciding whether to pursue a central bank digital currency, Senator Lummis says to delay it.

“I would say, delay it, when it comes, just make it about central banks, here and abroad, and not go directly to consumers,” she said.

Bill is leading a Chinese central bank digital currency study to understand what the Chinese will use and what impact a digital yuan would have on US markets.

“It’s probably a lot of intelligence gathering than anything else,” says Gillibrand. “So we have to figure it out.”

The senators’ overall goal is to keep crypto in America and compete with the world.

“One of the biggest goals for Cynthia and I is to create a market here in America that can stay in America, that that investment and that growth can be part of the American economy, and that those people who want to innovate here can do it and have these basic parameters of anti-fraud protection, consumer protection, security and robustness,” Gillibrand said.

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Two Senators Detail New Crypto Legislation To Create Capital Gains Tax Exemption

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