Several U.S. lawmakers expressed concerns to the U.S. Treasury Department about a proposed tax system for digital assets in a Nov. 15 letter, citing its potential to stifle innovation and negatively impact the digital asset ecosystem.
The letter specifically concerns the tax rules proposed by the Ministry of Finance on August 25. In today’s letter, lawmakers called the proposal “unworkable” and argued that the rules in their current form will stifle innovation and damage the digital asset ecosystem.
Lawmakers warned that the new rules would expand the term “broker” to include a wide range of digital asset services, explicitly including DeFi services. They argued that this rule could apply even to DeFi platforms that normally do not know the identities of their users and could force many digital asset services to file double tax returns.
Lawmakers further expressed concerns that an overly broad or ill-defined term “digital assets” could include non-fungible tokens (NFTs) and payment stablecoins, potentially leading to regulatory complications. They argued that these assets should not be considered financial instruments or investment instruments respectively.
Lawmakers also called the comment period and implementation deadline “unreasonably short.” They asked for the deadline to be extended until December 31, 2023.
Twofold letter
The bipartisan letter was signed by nine different lawmakers on both sides of the political aisle. It was led by House Financial Services Committee Chairman Patrick McHenry and Representative Ritchie Torres. Other lawmakers who signed the letter include Majority Whip Tom Emmer and Reps. Warren Davidson, Eric Swalwell, Wiley Nickel, French Hill, Byron Donalds and Erin Houchin.
Despite recent developments, the digital asset tax debate has been a controversial topic for quite some time. Many of the same lawmakers complained about the proposed tax rules in a January 2022 letter. McHenry also criticized the proposal in August, while others, such as outspoken anti-crypto Senator Elizabeth Warren, have called for faster implementation.
By the way, several of the aforementioned lawmakers signed another letter today asking the Biden administration to provide information about Hamas’ cryptocurrency financing. A House subcommittee also held a hearing on crypto’s role in crime on the same day.
