Sorry, No Free Ride: Experts Say US Crypto Won’t Get Zero Capital Gains Tax

Recent reports of zero capital gains tax for US based crypto projects are getting the crypto community all excited.

This comes after former President Donald Trump said he would prioritize cryptocurrency regulation and signed an executive order to create a national digital asset stockpile. But industry experts say zero tax benefits for crypto assets is highly unlikely due to legal and economic obstacles.

Dennis Porter, CEO of Satoshi Action Fund, says eliminating capital gains tax on crypto is entirely up to the US Congress. In a recent post on X (formerly Twitter), Porter said the chances of such a proposal passing in the near term is unlikely. He pointed out the massive loss of government revenue which would contradict the Trump administration’s overall tax cutting agenda.

Challenges in Implementing Zero Capital Gains Tax

Eliminating capital gains tax presents a series of legal and economic hurdles that are hard to overcome. Eric Peterson, policy director at Satoshi Action Fund, said “Congress makes tax policy, not the president” highlighting the complexity of such reforms.

Key challenges:

  • Revenue Shortfalls: Capital gains tax brings in a lot of revenue for the federal government. A total exemption would mean budget deficits and politicians won’t like it.

  • Regulatory Concerns: Cryptocurrencies are classified as taxable assets like stocks and bonds. Exempting crypto would disrupt financial markets.

  • Political Hurdles: Even with bi-partisan support, major tax reform requires a lot of legislative negotiations which can delay or kill proposals.

John Deaton, a well known legal expert, recently questioned the eligibility of US based crypto projects for tax exemptions especially those with overseas operations like Solana and Tezos. This adds more complexity to any legislative changes.

Industry Push for Tax Reforms Instead of Full Exemption

Despite the challenges, industry leaders are pushing for practical solutions to ease the tax burden on crypto users. Dennis Porter said the community should focus on getting a de minimis exemption—a small tax exempt threshold for daily transactions like the $200 exemption for foreign currency transactions.

This would:

  • Allow users to make small purchases without tax reporting.

  • Match existing tax structures so it’s more doable.

  • Minimize government revenue impact while promoting mainstream adoption.

Porter says this is achievable and good for everyday crypto users. “Americans using Bitcoin for daily expenses shouldn’t have to report every small purchase” he said, “there’s bi-partisan support for this.”

Crypto Market Reaction and Future Outlook

The crypto market is hopeful for reduced tax burden under a crypto friendly administration. Eric Trump has said he’s for zero capital gains tax on US based crypto assets like XRP, Solana (SOL), and Hedera (HBAR). According to CoinGecko data, US based crypto assets have a market cap of over $560 billion so there’s a lot of interest from investors.

Meanwhile international crypto projects may face more scrutiny and tax. Reports say non-US crypto projects may be subject to 30% capital gains tax, a move to attract global investments to US based projects.

Key Takeaways:

  • Experts believe a full tax exemption is unlikely, but partial relief is achievable through the de minimis exemption.

  • Regulatory clarity and political negotiations will play crucial roles in shaping future crypto tax policies.

  • Investors should monitor upcoming legislative developments and policy shifts closely.

In the end, while zero capital gains tax is sexy, reality is more complicated. Focus on achievable regulatory changes that promotes growth and fiscal responsibility.

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ABOUT THE AUTHOR See More
Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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