Crypto Industry Update

The cryptocurrency firm Coinbase, Inc. joined several other crypto-entities in lobbying to draft their own cryptocurrency regulations before Congress regulates this fast evolving industry.

Coinbase’s proposal lays out broad principles for regulation that they believe Congress and the administration should adopt as Washington seeks greater oversight and control of the more than $2 trillion unpoliced marketplace.

The ideas ranged from drafting crypto-specific rules to setting standards through a self-regulatory body, to creating a so-called safe harbor for new crypto projects that would allow them to launch and grow for a few years before potentially registering with the Securities and Exchange Commission. A common industry refrain is dissatisfaction with the application of existing rules around securities and banking regulation to crypto firms, as well as a lack of clarity on when those rules apply.

In the meantime, some federal officials have said they already think the rules are clear for crypto firms. SEC Chair Gary Gensler testified last week before the House Committee on Banking that he thinks the current law “painted with a broad brush the definition of a security,” giving his agency a wide berth to regulate tokens and the cryptocurrency industry.

Two things remain certain: Congress is continuing its discussion on regulation of the industry, and the IRS is continuing its efforts to make certain those trading in cryptocurrency follow existing taxation laws.

If you have any questions regarding cryptocurrency taxation, please reach out to your Stanfield + O’Dell tax professional.