US President Joe Biden has recently begun communicating with key figures in the crypto industry, indicating a potential shift in the administration’s approach to crypto regulation. However, as election season approaches, the industry is uncertain about the future.
Biden’s administration has faced criticism for its support of controversial SEC crypto tax and custody regulations, which many in the industry view as impractical and harmful. These regulations would prohibit investors from claiming capital gains losses on unprofitable crypto trades, making certain types of crypto trading and yield farming unfeasible. Additionally, financial institutions dealing in crypto would be required to comply with extensive crypto custody reporting guidelines, creating significant resource burdens.
The proposed guidelines, part of the SEC’s Staff Accounting Bulletin rules known as SAB 121, aim to generate $40 billion in tax revenue over the next decade. President Biden has signaled his intention to uphold these regulations, despite widespread opposition from industry participants and lawmakers. Crypto lobbyists have donated $78 million to politicians advocating for more favorable tax and custody regulations.
In response to the administration’s stance, three political action committees – Protect Progress, Fairshake, and Defend American Jobs – have formed a super PAC to support pro-crypto politicians. Notable donors include Circle, Ripple, Kraken, Paradigm, and individual contributors like Coinbase CEO Brian Armstrong. The super PAC has raised approximately $110 million to support candidates who align with their goals.
While the Biden administration has engaged in discussions with crypto institutions and experts, the super PAC’s significant investment suggests a potential shift in the administration’s stance. Recent SEC approvals for Ethereum ETFs also indicate a more favorable climate for crypto projects, potentially influencing Biden’s position. However, the industry remains cautious, as the outcome of the presidential elections could significantly impact the future of crypto regulation.
Despite the administration’s recent engagement with the crypto industry, there is uncertainty about the future of crypto regulation. The situation may remain unresolved until the election, with a re-elected Biden potentially enforcing stricter regulations. The industry is closely monitoring the administration’s statements for more clarity on its stance towards crypto tax and custody.
In addition to these developments, the EU’s Markets in Crypto-Assets (MiCA) regulation is expected to transform the region into a hub for crypto adoption this year.