Trump’s Digital Assets Working Group just published its report on the US crypto industry, full of assessments and recommendations. The report thoroughly examined crypto tax policy, and suggested closing a swath of loopholes.
This attitude comes off as somewhat surprising, especially considering Trump’s general laissez-faire attitude. Still, the report doesn’t advocate for harsher rules across the board, advocating for expanded safe harbor programs.
Trump’s Report and Crypto Taxes
Earlier today, Trump’s White House teased a new report on the crypto industry, and it’s finally been released. The document covers a wide range of topics, from new regulatory structures to stablecoin-based dollar dominance and more.
Of particular interest, however, are its various recommendations on the subject of crypto taxes.
“Treasury and the IRS should publish guidance addressing the determination of Adjusted Financial Statement Income (AFSI) with respect to financial accounting unrealized gains and losses on investment assets other than stock and partnership interests…to address how unrealized gains and losses…are considered,” it claims.
Surprisingly, although Trump generally takes a laissez-faire attitude to crypto policy, much of the report deals with closing tax loopholes.
For example, it recommends closing the wash sale loophole, wherein traders can write losses off on their taxes while rebuying the same asset that caused these losses. Wash sales are explicitly illegal for most stocks.
To be clear, cryptocurrency wash trading is explicitly illegal in the US, but that refers to spoofing asset trade volumes to attract market attention.
Wash sales, on the other hand, exist as a tax evasion tool, and they’re a legal grey area for crypto. The report firmly recommends making the issue black and white.
Similarly, the report recommends implementing mark-to-market rules for crypto taxes. This means that assets would be assessed on their value in real time, not the taxpayer’s purchase price.
If a taxpayer continued hodling tokens that depreciated in value, this rule would save them money, but the more likely reverse scenario would incur penalties.
The report contains plenty more examples of policies like this. It considers that stablecoins may be more analogous to debt than commodities or securities, potentially triggering bond-like tax rules.
It claims that staked crypto might not qualify for simplified tax treatment, compelling asset stakers to file more arduous paperwork.
To be clear, these are only recommendations directed at Congress and various federal agencies. Indeed, the White House is under no obligation to reform crypto tax policy in this manner.
Furthermore, the report advocates for loosening other restrictions, such as expanding safe harbor programs for various traders and assets.
Still, this is the most detailed federal tax framework for crypto to date, with major implications for retail traders, funds, and stablecoin issuers. It seems very unlikely that none of its recommendations will take effect.
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