- The proposed rule emphasizes reporting regarding crypto transitions.
- Regulations are among the prime factors affecting crypto adoption.
Internal Revenue Service (IRS), a statutory body in the United States, will bring a new regulation for crypto intermediaries into effect. Reuters, a news agency, reports that cryptocurrency exchanges and payment processors would have to inform of transactions associated with digital assets.
The Proposed Rule Could Assist Crypto Users in Tax Evaluation
The U.S. Department of Treasury has proposed the form namely Form 1099-DA. The bill would assist cryptocurrency users in evaluating gains and taxes on their assets. In short, it requires brokers to report information similar to other assets including bonds and stocks, says the Treasury.
Moreover, centralized as well as decentralized cryptocurrency exchanges, crypto wallets, and payment processors will fall under the “broker” umbrella. The latest requirements come following the Bipartisan Infrastructure Bill which President Joe Biden signed into law in November 2021.
Affected entities will have to report information regarding transactions exceeding $10,000. Rules will come into effect in 2025, reports Reuters. According to the Treasury, “This is part of a broader effort at Treasury to close the tax gap, address the tax evasion risks posed by digital assets, and help ensure that everyone plays by the same set of rules.”
A Robust Regulatory Structure is Required
Recently, Indian Prime Minister, Narendra Modi discussed cryptocurrencies during an interview with India Today, an Indian news magazine. Attributing to the rapid development in the technology sector, he said, “The rapid pace of change of technology is a reality—there is no point in ignoring it or wishing it away. Instead, the focus should be on adoption, democratization, and a unified approach.”
In the meantime, he also emphasized on a robust global regulatory structure for emerging technologies including cryptocurrency. Like most countries, no central authority is regulating digital assets in India currently. However, according to the Finance Act 2022, crypto falls under Virtual Digital Assets (VDAs) and is subject to 30% tax.
The reason behind strict regulatory perception remains the potential risks associated with crypto assets. Recently, the Commodity Futures Trade Commission (CFTC), the U.S. derivatives market watchdog, charged four individuals for false solicitation of funds.
The North American Securities Administrators Association (NASAA), an investor protection organization, called crypto assets the top threat for investors in 2022. However, the market was on a constant rise in 2021 with several virtual currencies including Bitcoin (BTC), Ethereum (ETH), Solana (SOL), and more, reaching their all-time high.
Regulations are among the prime factors affecting crypto adoption. Nevertheless, only a couple of countries, El Salvador and the Central African Republic (CAR), are using cryptocurrency as a legal tender. In 2022, the news media website CNBC TV18 published a list of nations that may adopt Bitcoin as a legal tender.