Thanks to a new bipartisan bill introduced yesterday in the US Senate by Sen. Toomey (R-PA) and Sen. Kyrsten Sinema (D-AZ), Americans may be able to buy coffee with crypto without triggering an outbreak. taxable event. The Virtual Currency Tax Fairness Act provides for a de minimis exemption for winnings under $50 on personal trades and for personal trades under $50.
“While digital currencies have the potential to become a regular part of everyday American life, our current tax code stands in the way,” Senator Toomey said. “The Virtual Currency Tax Fairness Act will make it easier for Americans to use cryptocurrencies as everyday payment by exempting small personal transactions like buying a cup of coffee from tax.”
Removing the tax barrier could not only encourage those who hold the cryptocurrency to use it more as a means of payment, but could also help those who already use it and are unaware of the potential tax consequences on very small purchases. “We’re protecting Arizonans from surprise taxes on everyday digital payments, so as the use of digital currencies grows, Arizonans can keep more of their own money in their pockets and continue to thrive,” Sen. Sinema said.
Under current law, each time a digital asset is used, a chargeable event occurs. For example, if you used digital assets to buy a cup of coffee, the person would owe capital gains on the transaction if the digital asset appreciated in value, even if the asset only appreciated by one fraction of a penny.
In November 2021, the Pew Research Center noted that 16% of Americans had invested, traded or used a cryptocurrency. “The use of virtual currencies for retail payments continues to grow in popularity, making it essential for Americans to understand their tax obligations,” said Kristin Smith, executive director of the Blockchain Association. “By providing an exemption for small daily purchases, the Virtual Currency Tax Fairness Act eases the burden on consumers and enables greater use of virtual currencies for more people. We are proud to support this bipartisan bill in the Senate.
Various payment companies designed for merchant companies to receive cryptocurrency would likely benefit from this new type of law. “Cryptocurrency needs the same exemption for small personal transactions that we have for foreign currencies,” said Jerry Brito, executive director of Coin Center. “This would promote the use of crypto for retail payments, subscription services and micro-transactions. More importantly, it would promote the development of a decentralized blockchain infrastructure in general, as networks depend on small transaction fees that today subject users to compliance frictions that undoubtedly cost the user more. economy than the tax revenue otherwise generated. We are very grateful to Senators Toomey and Sinema for introducing the Virtual Currency Tax Fairness Act which will continue to solidify American leadership in cryptocurrency.
The Crypto Council for Innovation, one of the new industry groups made up of Paradigm, Coinbase, Fidelity, and Square, also lent its support to the bill. “We applaud the bipartisan leadership of Senators Toomey and Sinema. Their legislation is forward-looking and focused on the utility of this new technology,” said Sheila Warren, CEO of the Crypto Council for Innovation. “With 1 in 5 Americans owning or using crypto, greater regulatory clarity will support the next stage of industry growth. We look forward to assisting policy makers in the work ahead. »
Companies looking to give consumers the ability to use digital assets for merchant payments will also likely support such a bill. However, the President’s most recent budget shows revenue from collecting taxes on cryptocurrency earnings, which may prove a barrier to offering any kind of tax exemption.