Original author: TechFlow
The market is a giant Christmas tree.
Yesterday, the market was still immersed in the good news brought by Trumps support for cryptocurrency, but before it could be happy for a single day, Bitcoin fell all the way back to the starting point, wiping out all the gains brought by Trumps voice, and drawing a door that made the market uncomfortable.
But the market has finally grabbed a life-saving straw and has not easily given up the possibility of digging out more market-friendly benefits from Trump.
On the morning of March 4, Mike Alfred, founder of Alpine Fox LP, tweeted that the Trump administration may be awarded an announcement of a zero capital gains tax policy on cryptocurrency sales at the Crypto Summit on Friday.
As for Mike Alfreds rumor that Trump is preparing to announce a zero tax rate for cryptocurrencies, Adam Cochran, partner of Cinneamhain Ventures, directly criticized: Mike blocked me because I repeatedly verified his facts, but this doesnt stop me. The president cannot unilaterally amend the tax law. Only Congress can. This is one of the few congressional powers clearly stated in the Constitution. Even if the president announces the decision, or attempts to sign an executive order for it, it will not make it law. This is no more effective than my declaring that I am a cupcake.
The abolition of crypto capital gains tax is a big deal for the crypto market itself, for market participants, and for the U.S. government.
Naturally, there is endless debate on social media about the authenticity of such a major event.
Putting aside the market noise, let’s first look at what impact will the tax exemption for cryptocurrencies have on the market if it succeeds? If it fails, what factors will constrain it?
How are cryptocurrency taxes collected now?
Lets talk about the current situation first. According to the Coinbase tax guide , in the United States, cryptocurrency is not currency. The IRS (Internal Revenue Service) defines cryptocurrency as property. If you buy Bitcoin and sell it when the price goes up, you will have to pay capital gains tax on the money you make. The tax rate also depends on how long you hold the currency:
That is to say, if an American citizen buys 10,000 yuan worth of Bitcoin, and it rises to 20,000 yuan three months later, and sells it for a profit of 10,000 yuan, the net profit of 10,000 yuan must be taxed at the ordinary income tax rate (10% -37%), and several thousand yuan may be lost. If you sell it after holding it for a year, the tax rate is lower, and you may only pay 1,000 or 2,000 yuan, or even tax-free if your income is low. But in any case, taxes are inevitable.
Of course, not only transactions, but also ordinary income tax on cryptocurrencies applies to various activities using cryptocurrencies as a medium, such as mining, staking, salary payments, airdrops, etc. Individuals are required to declare according to the fair market value when received and pay taxes according to the ordinary income tax rate (10%-37%).
What would happen if there was really zero profits tax?
Suppose Trump really abolishes the capital gains tax on crypto assets, what will be the impact? Lets put aside the high-sounding analysis for now and talk about what will happen to the market and ordinary people.
For the market, the removal of tax restrictions will naturally encourage more American hot money to invest, and at the same time, short-term trading behavior will increase due to the absence of tax restrictions, and short-term market fluctuations will be amplified. More crypto project teams will also be attracted by the zero-tax policy, and large projects will move to the United States. The United States will also become the capital of crypto assets promised by Trump.
Just giving the market a profit is basically like asking the government to cut its own flesh. Without the billions of dollars originally collected from crypto taxes each year, the governments public budget will have to be recalculated, and various expenditures such as infrastructure and medical care may have to be squeezed out from other places. If ordinary American taxpayers who do not touch cryptocurrencies learn that the wealthy people who speculate in cryptocurrencies are tax-free, while they still have to pay income tax honestly, they will inevitably feel psychologically unbalanced.
In summary, if the current U.S. crypto capital gains tax has no impact on you, then the impact of the (possible) tax exemption policy on your personal crypto asset returns still needs to be analyzed on a case-by-case basis. It is not appropriate to simply describe it as positive or negative.
There are constant rumors, but will it come true in the end?
There have been news reports about changes to cryptocurrency taxes. In January, The Street reported that Eric Trump, Trumps son who is keen on participating in crypto activities, confirmed that top US crypto projects such as XRP and HBAR will enjoy zero capital gains tax, while non-US projects will face more than 30% capital gains tax.
Dennis Porter, co-founder of the Satoshi Action Fund, said that completely abolishing crypto taxes is unrealistic in the short term, but changes such as a “minimum exemption amount” can be pursued.
So, even though the slogan is loud, the tax law is not decided by Trump alone.
The U.S. Constitution stipulates that changes in tax policy must be approved by Congress. Even if the Republicans support it, the Democrats may not do it.
The U.S. local tax law system is complex, and the specific policies of each state vary. How to reach a consensus is a lengthy issue.
Conclusion: Dreams are good, but maybe we have to wait
The abolition of crypto capital gains tax is a beautiful wish for the majority of market participants. If it comes true, it will certainly help the struggling market to regain its momentum. But in reality, the market changes and a series of social problems brought about by the zero tax rate are obstacles that policymakers cannot avoid, so this wish may only be a hope in the short term.
In my opinion, this is more like one of the many big cakes painted for the crypto market. It looks good, but whether it can be eaten smoothly in the end depends on the mood of Congress. For retail investors like me, we can dream, but we must hold our wallets tightly and not bet on our future all in just because of some rumors.
