Will the new tax rules hinder or help cryptocurrency investors?
Tax changes are coming for crypto investors. Last month, President Biden enacted the U.S. infrastructure bill. Among a long list of provisions, the new law includes key tax reporting changes that will impact crypto investors and brokers. For example, under the new law, all cryptocurrency exchanges will be considered traditional brokers for tax purposes. In addition, digital assets totaling $ 10,000 or more will be considered cash for tax purposes.
In this segment of Backstage Pass, registered on November 17Fool contributors Connor Allen, Travis Hoium and Rachel Warren discuss the impact of tightened regulations on crypto investors, as well as China’s recent crackdown on the crypto community.
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Connor Allen: Anything that makes people money will be regulated and taxed, which is to be expected. But about my worry, I’m really not too concerned that it’s regulated because I knew it was always going to happen.
I just want to touch on the point of decentralization and its importance to the crypto industry. It’s not about not being regulated. It is about nobody controlling the money supply. I understand that China might be doing a little bit, but being taxed is not the same as China cracking down and not allowing mining or not allowing crypto.
China worries me a bit, but for US regulations, there really is no need to worry. Honestly, I think the new regulation that we are seeing gives credit to the crypto industry as a whole. The more regulation there is, the more the government believes in this thing. Everyone believes in this thing and therefore it develops this merit that people wanted to see from crypto.
With regulation, everyone will learn to navigate as they have learned to navigate in the past on all kinds of asset classes. Now, I’m not a big fan of regulation in general, but I really don’t think it’s going to be a huge issue for a lot of crypto investors or anyone in this space.
Obviously, one thing is that a lot of regulators might not know much about cryptocurrency. This could be cause for concern. You see some of these things that they talk about trying to understand crypto and trying to talk about crypto. Are you like, do you know what you’re talking about? It doesn’t seem like they have a good understanding.
Especially one thing with Bitcoin ETFs, regulation, and all of that good stuff is that they allow a Bitcoin ETF at futures, but they don’t allow a Bitcoin ETF at real price.
It makes me a little confused why they would allow one over the other. The reason is that they think it is a potential danger to shareholders. But on the other hand, you are going to allow short triple leveraged ETFs and bare options for many retail investors.
You are going to allow all of this, which investors are very likely to get hurt, but you will not allow a Bitcoin ETF. There are a lot of regulations that I’m skeptical of, but nothing that really worries me.
Rachel Warren: Yes of course. Did you have anything else to add on this Travis?
Travis Hoium: One thing to add is, I think as regulation comes into the industry, as investors we need to think about which companies are equipped to adapt to that regulation.
This is where a company like Coinbase, you don’t see them fighting a lot of these regulations. They kind of encourage them because they have the capital and the infrastructure to adapt to them. I think that’s sort of the same reason why Facebook doesn’t fight regulation.
It’s a deal because the regulations end up leading to foreclosure. While it is really difficult to meet some of these requirements, it will be more difficult for start-ups to disrupt business like Coinbase, now that Coinbase is a nearly 100 billion dollar company, that could be exceeded now. . This is good news for them. From an investment standpoint, it’s another thing to think that sometimes regulation is good for stocks.
Connor Allen: They also already have these relationships in place with regulators. Sorry Rachel, you can continue now.
Rachel Warren: No. [laughs] Nice thoughts from you two. Thank you. Yes I agree with you. I think I understand why investors get a little nervous when they hear, âOoh, the government is getting involved in regulation, what does that mean? “
But at the end of the day, I think what we’re seeing specifically in the United States is designed to help protect that part of the market, but also to help protect investors. I think this is something very important to remember.
I think it can also help legitimize and strengthen the industry in the long run. It was interesting because I found an article from Guardian post where they discussed how the International Monetary Fund had warned of global risks associated with the unregulated cryptocurrency boom.
One of those issues is that the article says, “There are also several high profile cases of theft of customer funds linked to the hack. So far, these incidents have not had a significant impact on financial stability. But as crypto assets become more mainstream, their importance in terms of potential implications for the economy at large is set to increase. “
The other thing where an industry that isn’t regulated, the concern is that the crypto Wild West, as it’s called, is creating these loopholes for regulators and can open unwanted doors for things like money laundering. money, terrorist financing.
I think there are so many advantages to this from a societal point of view, but also for investors. When you have something that is not regulated, your hard earned money can also be at greater risk.
I think this is a good thing. I think you have this constant struggle of technology moving so rapidly now that we need digital currency and the laws are so slow to catch up.
Some of these tax codes that could be used to encompass some of these regulations, I tend to think they might need to be updated as we move forward in the years to come. But I agree, overall this is a great step in the right direction.
Connor Allen has no position in the stocks mentioned. Rachel Warren has no position in the stocks mentioned. Travis Hoium is the owner of Coinbase Global, Inc. The Motley Fool owns and recommends Bitcoin. The Motley Fool recommends Coinbase Global, Inc. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.