One of the biggest obstacles for institutions, investors, individuals, entrepreneurs in the United States and abroad to use blockchain and crypto assets, whether for payment purposes or for other hedging opportunities, is the lack of transparency on how these will be treated. assets. , Sean Stein-Smitheconomics professor at Lehman College, told PYMNTS about the need to have proper financial regulation for crypto assets.
In the US, different regulators, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), have different views on how to treat, how to value, or how to tax assets. According to Stein, there is a need to “have more transparency and then try to create an ecosystem or an environment where organizations and people can use crypto and have confidence that by doing so, they’re not going to accidentally stumble into some politics or issues.” of compliance in the future.
Interestingly, for Stein Smith, the best way to regulate crypto assets would be with comprehensive legislation, but in his opinion, this is unlikely to happen with all the elements, products and agencies involved. “Cryptocurrencies are not just cryptocurrencies or stablecoins. Crypto is a general umbrella term that has ICOs (Initial Coin Offerings) SEO, Privately Issued Cryptocurrencies, and NFTs. So trying to perfect every iteration is not going to work,” said Stein Smith.
However, one area of particular concern for Stein Smith is taxation. How are these assets going to be treated from an income tax perspective? “Right now in the US, any time you use any crypto, whether it’s bitcoin or anything else, in a transaction, you buy anything, you pay for anything, you get paid in those items, that creates an obligation tax payment. And ultimately that constant source of friction and then income tax obligations is a huge headwind that prevents crypto, I think, from being a mainstream payment option,” she said.
The fiscal problems are likely to be resolved over time, but one of Stein Smith’s worst nightmares when it comes to regulation is that this problem will not change. That would mean any transaction, whether $8 million or $8 million, would be subject to the same income tax compliance, filing and payment obligations. To make matters worse, a recent bill that goes into effect in 2024 added a clause to an existing line of IRS code that essentially makes breaking the rules a felony punishable by jail time.
Another issue that raises some flags for Stein Smith is the impact that private stablecoins and central bank digital currency (CBDC) could have on the dominance of the dollar as an international currency. “While the rise of private stablecoins is great for the development of blockchain and other crypto technologies, ultimately Congress and the Federal Reserve have to be more proactive, they have to move a little faster on this issue,” she said.
Read more: US Stablecoin Bill Offers Safe Harbor for Issuers
This interview is based on an article that can be found on the TechREG Chronicle, our monthly magazine featuring articles from technology regulation experts to fuel discussion and debate. To receive this publication subscribe here.
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