With his economic agenda at stake, President Biden contemplates raising taxes on the highest income earners in America. Here’s how it could affect crypto.
With his approval ratings battered by several failures in the withdrawal from Afghanistan, Joe Biden is turning his attention to massive infrastructure spending and expanding the government’s programs to provide a social safety net for Americans who are struggling.
Biden Proposes Tax Hikes to Boost Washington’s Budget
If passed, Biden’s tax plan would raise the top corporate income tax rate by a further 5.5 percent. It would raise the individual income tax rate by a further 2.6 percentage points.
The bevy of tax increases would also place a 3 percent surcharge on individual income above $5 million, as well as a capital gains tax of 25 percent.
The current capital gains tax rate in the United States is 20 percent in the highest bracket, 15 percent in the middle tier, and 10% in the lowest bracket.
Don’t forget, if you bought $5,000 worth of bitcoin, then sold it for $50,000 to buy a Tesla, the sale of your coins for a profit triggers a taxable event for the IRS, which considers your income to now be $45,000 higher for that tax reporting year.
Cryptocurrency still occupies a sort of legal and regulatory limbo, as the technology and how it fits into the economy is so novel and still a very recent development. Legislators and regulators are notorious laggards when it comes to comprehending and regulating new technology. Several contentious proposals are currently in the works to address this.
But at the moment, cryptocurrency tokens like Bitcoin (BTC) are treated as property by the U.S. Internal Revenue Service, and profits made from the sale of bitcoin at a higher price than investors bought it for are taxed as capital gains income.
Here’s How It Will Affect Crypto
So the Democrats’ increase in taxes will affect the wealthiest crypto investors by a tidy sum, and will even affect smaller investors with higher taxes when they go to file. That’s especially true of crypto traders who take profits in the short term on digital assets they’ve held for less than a year.
That’s because the current 10%, 15%, and 20% tax rates on capital gains apply to property held for more than a year. Investors that buy and sell cryptocurrency for a profit in under 12 months have to report the income as ordinary personal income and pay the rate of their tax bracket (10%, 12%, 22%, 24%, 32%, 35% or 37%).
Congress is meanwhile looking to close other “crypto tax loopholes,” like cryptocurrency’s lack of a wash sales rule, like those that apply to stocks and bonds. At the moment, crypto investors can write off on their tax returns crypto sold at a loss only to immediately repurchase it. A proposal in Congress seeks to close the loophole, projecting to raise $16 billion over the next ten years.
Will any of this discourage cryptocurrency investing, or hurt market prices for crypto? Not likely, because the tax proposals don’t apply to crypto specifically, but will affect capital gains tax rates on other asset classes like stocks and bonds as well.
Coinbase CEO Shows Support for Ripple and XRP Amid Battle with SEC
The XRP Army believes that Brian Armstrong could be hinting at relisting the cryptocurrency
Coinbase CEO Brian Armstrong has displayed support for Ripple in its fight against the U.S. Securities and Exchange Commission.
In a series of recent tweets, Armstrong writes that the company’s case is seemingly going “better than expected.”
Armstrong stressed that launching attacks against the crypto industry and hurting investors is “politically unpopular.”
The head of the largest American exchange then channeled Ripple’s oft-repeated talking point about the SEC hurting consumers instead of protecting them:
The irony is that the people they are supposedly protecting are the ones attacking them.
XRP relisting rumors get a new life
Armstrong’s tweets inevitably reignited rumors about Coinbase potentially relisting XRP on its platform.
The exchange moved to suspend XRP trading after the SEC filed a lawsuit against Ripple on Jan. 19, which triggered a massive price drop.
As reported by U.Today, Coinbase relisting rumors started making the rounds on social media after XRP trading pairs started showing up on the company’s mobile app last month, but it ended up being a bug.
Despite its legal troubles, XRP has remained resilient, with crypto mogul Mike Novogratz recently noting that the cryptocurrency has tripled in value since the agency filed its complaint.
The value of $XRP has actually almost tripled since the SEC actions. It hasn’t plummeted. It’s a testament to the fact that once communities are formed with shared interest they are damn resilient. https://t.co/0IPcd8wyuN— Mike Novogratz (@novogratz) October 17, 2021
Coinbase’s run-in with the SEC
Ripple started alighting itself with Coinbase after Armstrong publicly called out the SEC for threatening to sue the leading exchange over its yet-to-launch lending offering.
Even though the company caved in to the SEC’s demands and shelved the product in question, it seems like it hasn’t buried the hatchet with the formidable regulator.
Earlier this month, Coinbase proposed replacing the agency with a new cryptocurrency-focused regulator, arguing that the laws from the 1930s were not suitable for the “technological revolution.”
The exchange will have to convince Congress to pass a legislation that will establish a dramatically different regulatory regime that it envisions.
Legendary Trader Peter Brandt Challenges Binance with Four Questions about 88% BTC Crash
Here’s what is unclear for Mr. Brandt about mysterious Bitcoin (BTC) flash-crash of Oct. 21, 2021
Prominent trader and analyst Peter Brandt has taken to Twitter to ask his four questions in the context of the flagship crypto’s 88% dropdown.
What do Binance and Binance.US have in common?
First of all, Mr. Brandt challenged the character of corporate relationships between Binance and Binance.US, its unit focused on American markets.
1. What is exact corp. relationship @binance w/ @BinanceUS
2. Will firm release T&S with all trades/volume/price?
3. Did firm take opposite side of client fills
4. Will firm change low to reflect actual fills
cc: @GaryGensler @CFTC @SECGov @cz_binance @IBKR pic.twitter.com/huqzZbSGIt— Peter Brandt (@PeterLBrandt) October 24, 2021
Also, Mr. Brandt asks whether Binance is planning to release detailed documents to specify statistics for trades, their volume and prices during the flash-crash.
Then, the trading legend asked about the role of the platform in taking the opposite side of a client fills.
Besides the Binance CEO and co-founder Changpeng “CZ” Zhao, Mr. Brandt mentioned the Interactive Brokers platform, U.S. watchdogs CFTC and SEC and Gary Gensler, the SEC chairman.
Most expensive “trading algorithm bug” ever?
Also, Mr. Brandt attached a screenshot of a tweet by CZ when Binance’s boss warned his audience about expected volatility spikes across cryptocurrency markets.
Finally, Mr. Brandt added that he never used Binance for trading.
As covered by U.Today previously, on Oct. 21, 2021, amidst a spending rally, the Bitcoin (BTC) price briefly tanked to the $8,000 level, losing more than 88% in no time.
A similar flash-crash was registered on 26 other low-liquidity exchanges. A Binance.US representative attributed this dramatic plunge to a critical bug in third-party mechanisms by one of the platform’s sophisticated institutional clients.
Crypto investments a financial backup for Facebook whistleblower
Haugen worked as a Facebook product manager before accusing the company of spreading controversial and insensitive misinformation. She allegedly possesses numerous confidential research documents, which, according to her, shows that “Facebook prioritizes profit over the well-being of children and all users.” Previously, Facebook has been accused of influencing the 2016 United States presidential election with the help of Russian agencies.
In a follow-up interview with The New York Times, Haugen was asked about her financial situation:
“For the foreseeable future, I’m fine, because I did buy crypto at the right time.”
The whistleblower also received financial help from nonprofit organizations (NPO) backed by Pierre Omidyar, a co-founder of eBay. However, Haugen clarified that Omidyar’s NPO fundings were only used to finance travel and related expenses.
According to Haugen, shifting to Puerto Rico helped her join her “crypto friends” who enjoy capital tax exemptions on Bitcoin (BTC) and cryptocurrency assets.
Iconic whistleblower and former U.S. Central Intelligence Agency agent Edward Snowden also continues to show support for the Bitcoin economy amid regulatory pressures from governments across the world.
On Oct. 4, Snowden tweeted about Bitcoin’s tenfold growth despite China’s blanket ban on crypto mining and trading.
Sometimes I think back to this and wonder how many people bought #Bitcoin then.
It's up ~10x since, despite a coordinated global campaign by governments to undermine public understanding of—and support for—cryptocurrency.
China even banned it, but it just made Bitcoin stronger. https://t.co/pbnOFGfaVf— Edward Snowden (@Snowden) October 3, 2021