Trump’s Digital Assets Working Group Proposes Big Changes to Crypto Tax Rules
US President Donald Trump administration’s Digital Assets Working Group has released a new report on the U.S. cryptocurrency sector. This document includes a wide range of proposals targeting tax policy, regulatory definitions, and the classification of crypto assets.
The report comes as a surprise given Trump’s usually hands-off stance toward crypto. But, the team working on the document seems to be prioritizing the tightening of already utilized rules alongside providing certain relief to both traders and platforms.
Earlier, the White House had teased a release of a new report regarding the crypto market. And now, the report is out and available to the general public.
Among the primary problems the report aims at solving is the wash sale loophole. This strategy enables crypto holders to dispose of their crypto at a loss, reinvest in the asset immediately and claim the loss against their tax liability. The report suggests that this option should be eliminated. In this sense, although the practice is prohibited in conventional markets, crypto has existed in a regulatory gray zone.
Digital Assets Working Group’s report also suggests using mark-to-market taxation of cryptocurrencies. With such a system, holders could report their gains or losses every year, on the basis of what their assets are worth in the market on a given date, without having sold them. This would place crypto directly on the same level as other investment vehicles and eliminate the tax advantage of simply ‘hodling’ to escape taxes.
As an example, suppose a token’s price increases by the end of the year, the investor would be charged tax on the unrealized gains. If it drops, they could report a loss. This change could affect long-term holders who prefer to wait out market cycles without realizing gains or losses.
According to the report, the Treasury and IRS should offer guidance on how unrealized profits and losses should be handled under the proposed system. It indicates that existing regulations are unclear, particularly those assets that are not categorized as stock or partnerships.
The recommendations are geared towards eliminating ambiguity and sealing loopholes through which traders evade their tax obligations.
The report presents a review of the way that stablecoins and staked crypto assets are to be taxed as well. Stablecoins do not have to be commodities or currency but might be. Rather, they should be treated as debt instruments. This reclassification would translate into tighter tax regulations in line with taxation on bonds.
This kind of change would affect issuers as well as holders. Those who use or stake stablecoins might have to provide more reports and be regulated.
Regarding staking, there is a warning in the report that the income received as a result of staking is not necessarily entitled to simplified reporting. With greater documentation, the reward may need to be claimed as regular income by stakers. This would add more filing load to retail users who stake tokens by using blockchain networks or other platforms.
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