Senator Cynthia Lummis is preparing a bill that would affect the cryptocurrency market. The Responsible Financial Innovation Act would change the capital gains tax implications of transacting with bitcoin and other cryptocurrencies. Many ”BREAKING” tweets have been circulating, stating “US Senate Bill to make $600 bitcoin purchase tax free” but it goes deeper than that. The bill‘s aim, as first reported by decrypt.com, is to provide a tax exclusion of up to $600 of cryptocurrency purchases, allowing users to transact with their cryptocurrencies without incurring a capital gains tax penalty, e.g., buying a new TV with bitcoin. Now $600 isn’t a lot of money, but it’s a place to start. This could lay the groundwork for bitcoin becoming a true means of exchange in the US. If this tax exempt value increases over the years, bitcoin hodlers may feel more incentivized to spend their holdings. With a large store of capital in bitcoin, US politicians should see this as economic fuel in a slowing economy - incentivizing bitcoin holders to transact with their capital could provide needed economic stimulus in this environment.
In addition the bill seeks to remove capital gains from “productive” activities. This would include mining and staking. With the growth of mining in the US, it’s not only driving energy grid sustainability, but job growth as well. Providing tax incentives in this industry will only further promulgate these positive impacts.
This bill has yet to pass, and its contents have yet to be fully released, but so far it seems like promising groundwork to build off of. We will continue to monitor as the information develops further.