Quartz | Nate DiCamillo | Dec 6, 2022
Picture: Unsplash/Wance Paleri
Crypto merchants don’t have to maneuver their funds offshore to evade US taxes, so long as the US authorities permits wash buying and selling of the nascent asset class.
- Tax loss harvesting: A gaggle of economists from Cornell College, the College of North Carolina, and Tel Aviv College have found that each time the US will increase crypto tax scrutiny, buying and selling exercise rises at US-based exchanges. That’s as a result of merchants are promoting crypto, recording losses on their taxes, and shopping for it again to keep away from incurring any precise losses. The economists launched their findings this week in a working paper published by the National Bureau of Economic Research.
- It is illegal for stock traders to engage in wash trading, which occurs when they buy and sell an equity within a 30-day period before or after the sale.
- This rule doesn’t exist for crypto in part because of the scattered regulatory approach the US has taken towards it, the economists argue.
See: Crypto Pragmatist: Checkout these free crypto (trading) tools
- Regulatory confusion: The IRS, for instance, treats crypto as property, while the Commodity Futures Trading Commision, which regulates derivatives markets, treats it as a commodity. Meanwhile, the SEC wants to apply securities regulation to large parts of crypto. The Financial Accounting Standards Board has said that accountants should no longer treat crypto as an intangible asset and should instead adopt fair-value accounting for it.
- As a result, the US is losing a significant amount of tax revenue. The researchers assumed a tax rate of 30% and paired that with falling bitcoin prices, and then estimated that the US Treasury likely lost somewhere between $10 billion and $16.2 billion.
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