Biden Crypto Rules to End Wash Sales Strategy
The upcoming budget proposal to be presented by US President Joe Biden will usher in a few surprises for crypto industry stakeholders.
Among them is cracking down on the entire decentralized finance (DeFi) industry concerning wash sales, according to a Wall Street Journal news report.
Wash sale is a strategy some traders and investors use whereby they trade or sell a security at a loss and then buy a similar security 30 days before or after the sale.
The Wash Sale Rule was enacted by the Internal Revenue Service (IRS) in the 1920s and helped prevent investors from using losses from their capital to their advantage when the time comes for them to pay their taxes.
While the rule applies to stocks and was later extended to options, contracts, and other types of trading and securities, the Wall Street Journal reports it will soon be applied to crypto. This will end the use of the strategy and change the notion of the crypto sector being regarded as a tax haven.
This Biden crypto rule is part of ameliorating the crypto tax treatment that aims to raise around $24 billion to help reduce the country's deficit by about $3 trillion over the next decade.
Biden crypto rule changes are not the first
The latest stance taken by the US is seen as a positive on the global regulatory stage. Many industry experts believe that following actions by other regulatory bodies in countries such as Canada and Australia will help prevent crypto traders from taking advantage of the tax system and ensure they contribute their fair share in taxes, just like other investors profiting from trading.
Capital gains to be doubled
Capital gains tax (CGT) is paid on the profit made from selling an asset. The new US budget proposes doubling CGT from 20% to 39.6% on long-term investments that result in a minimum of $1 million in profits.
Aside from this, the budget plans to increase levies imposed on wealthy Americans and corporations.
Author: Raphael Minter
Raphael Minter/ Albert Zuhnden (preferred pen name) is a crypto finance writer, data miner, and fundamental analyst. Raphael has written hundreds of articles about centralized and decentralized financial instruments such as precious metals, commodities, stocks, and cryptocurrencies. He broke into digital finance in 2016 and believes digital assets and blockchain technology is the future of finance.