• March 29, 2022

Biden Budget Proposal Estimates an Additional $11 Billion in Revenues by 2032 by Updating Crypto Rules.

The proposal also aims to increase the Department of Justice's budget by $52 million to tackle ransomware and "cryptocurrency misuse."

On Monday, US President Joe Biden released his budget proposal for 2023, in which he seeks to modernise rules around digital assets, which he claims will generate an additional $11 billion in revenue by 2032, as well as strengthen the Department of Justice's ability to combat cyber threats involving ransomware and the use of cryptocurrencies.

  • Amending the mark-to-market rules to include digital assets; requiring reporting of foreign digital asset accounts by certain taxpayers; providing for information reporting by financial institutions and crypto brokers; and treating loans of securities as tax-free to include other asset classes and "address income inclusion" are among the digital asset rules the administration is looking to update.
  • Between 2023 and 2032, the administration forecasts that upgrading these standards will generate about $11 billion in revenue, with nearly $4.8 billion coming from the first year of applying mark-to-market rules to digital assets.
  • "More agents, enhanced response capabilities, and strengthened intelligence collection and analysis capabilities," according to the proposal, which also notes that "these investments are in line with the Administration's counter-ransomware strategy, which emphasises disruptive activity and combating the misuse of cryptocurrency."
  • The mark-to-market adjustments, according to the Treasury Department's explanations of the plans, would include actively traded digital assets and derivatives of these assets in a group that would be subject to such restrictions at the end of each year. Only those digital assets that are consistently bought and sold for US dollars or other fiat currencies, have enough volume to provide reliable valuations, and have available reliable price quotes would qualify. For tax years beginning after December 31, 2022, the proposal would be in force.
  • Changes to the rules governing digital asset loans would be updated as well. The Treasury explanatory report stated, "The market for lending of financial and other assets has expanded over time to encompass digital assets and interests in publicly traded partnerships." "The nonrecognition criteria for securities loans should be changed to reflect this increase."
  • "Amend the securities loan nonrecognition rules to provide that they apply to loans of actively traded digital assets recorded on cryptographically secured distributed ledgers, provided that the loan has terms similar to those currently required for loans of securities," according to the loan rule change proposal.