Since 2014, cryptocurrencies like bitcoin have been considered property, not currencies, by the US Internal Revenue Service (IRS), meaning they are subject to property tax laws.
Last year, the IRS came to the conclusion that bitcoin owners “may fail, or may have failed, to comply with one or more provisions of the internal revenue laws” and decided the best way to investigate was to order major bitcoin exchange Coinbase to hand over all US user records from 2013-2015.
Coinbase reacted in January by launching a legal appeal against the order, claiming it was too broad and would involve innocent bitcoin owners. In the latest installment of this saga, an industry group, the Digital Assets Tax Policy Coalition, has been formed to help the exchange fight the IRS.
The coalition aims to work proactively with the US government to inform cryptocurrency policy. It was formed by the Digital Chamber of Commerce (DCD), a blockchain trade association, and law firm Steptoe and Johnson, and will be based in Washington, DC. Other members of the coalition do not want to be named out of fear they could also end up subject to the IRS’ demands, according to Bloomberg. The coalition’s main objective is to help the IRS develop a strategy that enables the agency to ensure bitcoin owners are paying the correct taxes, without the need for actions as wide-sweeping and burdensome as last year’s order.
The formation of the coalition should help drive clearer US regulation for cryptocurrencies and boost the industry. Since the 2014 decision to classify bitcoin as property, the IRS has issued little in the way of clear guidance to bitcoin owners. Meanwhile, last December’s order caused anxiety within the industry, and is likely holding back consumers interested in cryptocurrencies from purchasing such assets. The coalition’s formation should help solve these issues by putting pressure on the IRS to form clearer guidelines, and in turn, that should ease anxiety among bitcoin owners, driving further growth in the cryptocurrency industry.
Despite having one of the largest fintech industries in the world, the U.S. is noticeably behind other regions when it comes to one factor crucial to the future growth of this burgeoning sector — regulation.
The U.S. regulatory environment is holding back fintechs and hindering their chances of success.
Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on U.S. fintech regulation that examines the current regulatory landscape in the U.S. and how it's impacting the fintech industry. In addition, it discusses the methods fintechs are using to meet regulations as best they can, and details the fintech-specific initiatives that have already been launched by regulators and their likelihood of success. It also considers the future of fintech regulation in the U.S. and how it may shape the fintech sector long term.
Here are some of the key takeaways from the report:
- The U.S.' regulatory system involves many different players at the federal level, as well as a regulator for each state. This complexity not only makes the U.S. regulatory environment harder for fintechs to navigate in the first place, but it's a major barrier to the development of a coherent fintech policy.
- The U.S. regulatory landscape means it is falling behind other major fintech regions such as the UK and EU in certain segments. These regions already have established fintech regulatory policies.
- U.S. fintechs are using a number of models to achieve compliance, but none are ideal. As a result, many are finding it hard to achieve the scale necessary for success.
- Some U.S. regulators have realized the need to act regarding fintech regulation, and are launching initiatives with the aim of making compliance easier. That said, a coherent fintech regulatory policy for the U.S. is still a long way off.
In full, the report:
- Examines the current regulatory landscape in the U.S.
- Explains how it is negatively affecting the fintech industry.
- Outlines the initiatives currently in play from major regulatory agencies.
- Considers the future of U.S. fintech regulation and its potential impact on the fintech sector.
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