U.S. based cryptocurrency market player Circle has recently been found to be working alongside regulators in order to change the current awful tax treatment for crypto-to-crypto transactions.
During a recent AMA session on Reddit on Thursday, CEO of Circle, Jeremy Allaire, responded to questions asked by the community.
Reddit user Qwahzi asked.
“Any plans to work with the IRS [The Internal Revenue Service] to improve tax law for crypto? It’s a pain to have to report taxes whenever I buy something with crypto or make crypto-to-crypto transactions,”
Allaire replied with,
“this is an issue we care about and are pushing this in [Washington,] DC.”
“We believe there should be different tax treatment for crypto-to-crypto, especially for smaller payments oriented transactions. The leading government on this issue right now is France, where they are soon passing a law where there will be zero taxes on crypto-to-crypto transactions,” he added.
Answering a different questions, the CEO stated that Circle invests, “an enormous amount in educating regulators, and have since our founding in 2013.”
“This includes a global regulatory and government relations team with decades of experience in working with financial regulators and policy makers […] In general, regulators are keen to learn, and we spend a lot of our time trying to get them to understand the benefits of crypto, how it actually works, etc.,” Allaire said.
During the previous year, the IRS reminded taxpayers that they must report any income from cryptocurrency transactions, noticing,
“Taxpayers who do not properly report the income tax consequences of virtual currency transactions can be audited for those transactions and, when appropriate, can be liable for penalties and interest.”
Cryptocurrency has been labeled as property for tax purposes and is currently being placed under the same regulations for the time being.
The chance of this possible changing the current taxation systems is that Circle is a member of a lobbying group called Blockchain Association. Established during the previous September, the group has members from other major crypto industry, such as Coinbase, Protocol Labs, and investors at Digital Currency Group and Polychain Capital.
When it comes to dealing with challenges as a cryptocurrency company in terms of regulations or the lack of its existence, CCO and Head of Regulatory Counsel for Circle, Robert Bench wrote during the AMA,
“I think one of the key regulatory challenges in this industry is that its truly Global, so standards can differ across the board, and across exchanges, on multiple fronts (AML [anti-money laundering,] Securities, etc…). I think building innovative products always has regulatory challenges (which makes crypto so fun!), but the key is understanding how to pivot your products in a way that ensures the principles behind the regulation are met, and that you continue to bring joy to your customers.”
To a question about monitoring crypto transactions, he adds, “The law enforcement community (both U.S. and globally) understands that crypto, like any means of value, can be used to facilitate or fund crime. As they get smarter every day in this space, they’ll request information from firms like Circle where they think such transactions may have occurred on the platform.”
The answer behind this issue would be moving into utilizing privacy coins, and Bench further elaborates that no rules are currently in place for using them.
“Privacy coins get a great deal of regulatory and law enforcement attention, and rightfully so, as both Privacy and AML are two very hot topics at the moment,” he writes, adding, “In short, no rules or laws have been drafted in the U.S. regarding the privacy coins, and there remains a great deal of education in the space with our partners in government on the use cases for these coins.”
Furthermore, Allaire stressed out that,
“the biggest and most immediate regulatory hurdle we face is the lack of specific guidance from the SEC [The Securities and Exchange Commission] on how to classify various crypto assets.”
“We believe many are clearly currencies and commodities, and there needs to be more specificity on what are really securities. This can unlock a lot of market activity, and also clearly enable the growth of a market for crypto-based securities,”
Taxation of cryptocurrency has been a topic among people for quite a long while. As it’s popularity grows more and more outcry for taxing cryptocurrency will continue to grow among not only local governments but even some of its fellow crypto users. In a way, it does ruin the spirit of cryptocurrency, and regulations might decrease the efficiency at which digital assets may grow in certain areas of the world. Even so, it’ll be interesting to see what Circle can manage to pull off with their lobbying group.
What are your thoughts on this?