By
Chimamanda U. Martha
May 13th, 2024
The Treasury proposed the loan rule change that would treat loans of actively traded digital assets like regular loans with similar terms.
The Biden administration has submitted its budget proposal for the year 2023. In a bid to cut down on the deficit in the economy, the administration is looking to update crypto rules. The administration estimates the adjustment will generate about $4.5 billion in 2023 alone and up to $11 billion in a decade. It also proposed expanding the DOJ’s ability to respond to cryptocurrency cyber threats and ransomware attacks.
Accordingly, the administration plans to expand the crypto rules so that mark-to-market rules now include digital assets. This will require certain taxpayers of foreign digital asset accounts. It will also provide information reporting for brokers and financial institutions and improve income inclusion. Again, it would treat loans of securities as tax-free.
Separately, the administration is also seeking to expand the budget of the Department of Justice by about $52 million. The decision is in tandem with the administration’s counter-ransomware strategy to disrupt and combat the misuse of cryptocurrency. The DOJ will deploy the funds to the recruitment and training of more employees, improve response capabilities and strengthen intelligence.
Implication of New Crypto Rules
If approved, the rule will come into effect for the tax year beginning after December 31, 2022. The mark-to-market changes would mean that both actively traded digital assets and their derivatives can be added to the asset category. Of course, only digital assets which are regularly bought/sold in the US, have significant volume from which valuation insights can be drawn, and has available price quotes.
Regarding crypto loans, the Treasury noted:
“The market for the lending of financial and other assets has expanded over time to include digital assets and interests in publicly traded partnerships.”
As a result, the Treasury proposed the loan rule change that would treat loans of actively traded digital assets like regular loans with similar terms.
Sundry Adjustments
Earlier in the month, president Joe Biden issued an executive order affirming the legitimacy and importance of cryptocurrencies. He however stressed the need for stronger regulations to protect consumers, investors, and the entire financial system.
Likewise, the administration is proposing increasing the income tax of US households that earn more than $100 million. Whatever the case, Biden noted his administration was on course to reduce the US deficit