Despite clearing the vote to get out of a U.S. Senate committee, the vote on the full U.S. Senate floor of the Digital Asset Market Clarity Act continues to be pushed back. The Clarity Act primarily aims to provide clear rules for the offer, sale and trading of digital commodities in the United States. The […]
Despite clearing the vote to get out of a U.S. Senate committee, the vote on the full U.S. Senate floor of the Digital Asset Market Clarity Act continues to be pushed back. The Clarity Act primarily aims to provide clear rules for the offer, sale and trading of digital commodities in the United States. The bill also reclassifies most cryptocurrencies as digital commodities.
However, this latest development has not stalled all the legislation going through Congress around cryptocurrency and digital assets.
The U.S. House of Representatives is now taking a look at taxation for cryptocurrency and digital assets. However, rather than move forward with the Digital Assets Protection, Accountability, Regulation, Innovation, Taxation and Yields (Parity) Act, the House Ways and Means Committee divided the massive legislation into six new bills and held a hearing on June.
Ways and Means Committee Chairman, Republican Congressman Jason Smith from Missouri, described the current regulation framework for crypto as “untenable” and argued that the goal of this pack of bills is to address gaps in the tax regulation.
“The days of debating whether digital assets are a passing fad are gone. Continuing their current growth will only become further integrated into the economy. Americans need simplicity and clarity to own, trade and use digital assets with confidence,” chairman Smith said in his opening remarks during the hearing.
The first gap that the package of bills wants to address is for activities such as mining and staking, which are ways in which a user obtains a crypto coin or validates a translation. Smith explained that these activities don’t fit clearly in the current tax law. The second gap to close involves creating a more even ground between crypto-related investment vehicles and traditional finance investment vehicles, such as stocks and bonds. The third gap aims to ease the frictionwhen using crypto in everyday transactions such as buying groceries.
The broader concept of digital assets covers anything that is created digitally that can have monetary value, like metadata, or was created for the purpose of being bought and sold, like audiobooks or illustrations.
The discussion of digital assets within the Clarity and Parity legislations is specifically focused on products created in the blockchain, the technology that enables cryptocurrency and instruments of traditional finance that are also being used for crypto-native products. The latter includes investment vehicles such as Bitcoin ETFs, or exchange traded funds, which are used for people to track the price of Bitcoin but through the traditional finance space.
Aside from the coins, such as Bitcoin, the blockchain can be used to store contracts, used tokens or tokenized assets, a digital representation of a real-world asset like the deeds to a property. A tokenized asset is different to uploading something to a cloud because the blockchain works as a public ledger in which data is stored in “blocks” that cannot be changed. Any future changes to a contract or a deed or other tokenized assets would be stored in a different block within the blockchain. Therefore, there is no way of erasing the track record of an asset within the blockchain.
Because these congressional bills are not just discussing tax regulation but also complex technology, the committee’s ranking member, Democratic Congressman Richard Neal, from Massachusetts, expressed concern that his colleagues will be able to make informed decisions.
“The goal here is to have a bipartisan piece of legislation. I’m aligned with that goal eventually. There’s healthy skepticism on both sides as evidenced by the fact that there are still large numbers of Congress members who don’t comprehend all of the questions that we are currently discussing,” Neal said.
