The United States President, Joe Biden, recently shared an infographic on Twitter, which called for an end to tax loopholes that allegedly assist wealthy crypto investors. Members of the crypto community were quick to respond to the tweet, questioning the validity of the figures shared and the existence of said loopholes. According to Biden, eliminating these loopholes would save around $18 billion, but he provided no specifics regarding the loopholes themselves or what reforms would result in the potential savings.
Pseudonymous crypto researcher, FatMan, retorted that Biden’s “facts are off.” The analyst emphasized that the crypto market had contracted by $1.4 trillion in 2022, while corporate profits in the U.S. reached $11.8 trillion. “The crypto market is both much smaller & fell heavily. We both know where the loopholes really are,” FatMan suggested.
Dogecoin co-founder, Billy Markus, also questioned which loopholes existed. He claimed that he had given the government more money than he had earned in crypto, “while taking all the risk.” He further noted that most American crypto users are not wealthy, but they turn to crypto because they do not have sufficient funds otherwise.
A community member vented their frustration, criticizing the administration for targeting crypto, concurrently receiving funding from the former FTX CEO, Sam Bankman-Fried. The individual requested Biden to refund the money received from FTX.
While some remain uncertain about the crypto tax loopholes Biden mentioned, Redditors have speculated that it may be related to the Internal Revenue Service (IRS) wash sale rule. This rule forbids selling securities at a loss and repurchasing them within 30 days, which is not yet applied to crypto.
As an example, MacroStrategy’s move to sell Bitcoin in December serves as a possible illustration. On December 21, MicroStrategy’s subsidiary MacroStrategy sold 704 Bitcoin (BTC) at an average price of $16,776 per BTC. The company also conveyed its intent to reduce its tax bill.
On January 3, tax attorney and CPA Selva Ozelli dissected the sale and explained it as an instance of tax-loss harvesting. This common strategy involves investors choosing to lower capital gains by selling their digital assets at a loss.
With the lack of concrete information regarding the crypto tax loopholes and the uncertainty surrounding their existence, it is important for the community to remain vigilant and critical. As these discussions unfold, it’s essential to maintain an informed but cautious approach to these claims and potential regulatory changes.