Despite the recent surge in the price of bitcoin, supporters of the crypto-industry in Washington are feeling increasingly disheartened as their influence in the nation’s capital weakens. The latest blow came with the announcement on Tuesday by Republican Rep. Patrick McHenry of North Carolina that he will not seek re-election in 2024.
McHenry, who served as the chair of the House Financial Services Committee, has been a strong advocate for the crypto-industry on Capitol Hill. He fought tirelessly to push through an industry-backed regulatory-reform bill, but unfortunately, it stalled in a Democrat-controlled Senate.
The crypto-industry is expressing its disappointment over McHenry’s decision. Kristin Smith, CEO of the industry group Blockchain Association, stated, “we’re saddened to see such a champion for our industry leave the House.” She also expressed gratitude for the opportunity to continue working closely with McHenry for the next 13 months.
However, there are concerns that even if Republicans retain control of the House after next year’s elections, a new GOP committee chair may prioritize other matters over crypto, even if they share McHenry’s views.
Ian Katz, an analyst at Capital Alpha Partners, cautioned investors that the chances of passing crypto-related bills remain uncertain. He highlighted that the Democrat-controlled Senate would pose a significant obstacle, particularly with recent reports linking crypto to Hamas, which has further dampened Democrats’ enthusiasm for pushing crypto legislation forward.
In an interview, an industry insider lamented how McHenry’s retirement announcement might weaken his influence within the Republican caucus during negotiations to advance his market structure and stablecoin bills in 2024.
Despite these challenges, the crypto market continues its upward trajectory. Bitcoin has experienced a remarkable 165% increase year-to-date and a 25% surge in the past month. Other cryptocurrencies such as Dogecoin, Avalanche, Solana, and ether have also seen significant gains in the last 30 days.
- Bitcoin BTCUSD, +0.07%: 165% YTD, 25% in the past month
- Dogecoin DOGEUSD, +5.31%: nearly 35% gain on Kraken exchange
- Avalanche AVAXUSD, +14.67%: 109% gain in the past 30 days
- Solana SOLUSD, +3.96%: 56% gain in the past 30 days
- Ether ETHUSD, -0.03% (second-largest cryptocurrency by market capitalization): up 19% in the same period.
Cracking Down on Crypto Tax Evasion: IRS Increases Efforts
Investors who have profited from cryptocurrency may soon find the IRS on their tail as the agency intensifies its crackdown on tax evasion linked to crypto income. The IRS has obtained additional funding through the 2022 Inflation Reduction Act, enabling them to take action.
According to a recent report by the IRS, investigations into digital asset tax have spiked in 2023. The aim is to close the tax gap between what individuals legally owe and what is actually collected. The agency has observed a rise in incidents of unreported crypto income.
The investigations focus on various forms of unreported income associated with cryptocurrency. This includes failure to report capital gains from the sale of digital assets, income earned through cryptocurrency mining, and income received in the form of cryptocurrency, such as wages, rental earnings, and gambling winnings.
To further strengthen their enforcement capabilities, the IRS has already started hiring an additional 7,000 tax-enforcement personnel. The funding received from Congress will aid in tackling tax evasion effectively.
In addition to this, the IRS has proposed new regulations that would require digital-asset exchanges and crypto-payment processors to report information regarding users’ sales and exchanges. These rules are set to come into effect in 2025.
Despite these efforts, some Republicans, including Representative Tom Emmer of Minnesota, a supporter of cryptocurrency, are skeptical. They believe such proposals reflect the broader approach taken by the Biden administration, which they feel leans towards consolidating power and surveillance.
As the battle between regulators and the crypto sector continues, investors should be prepared for increased scrutiny and a stronger push for compliance. The IRS is leaving no stone unturned in their pursuit of closing the tax gap, and crypto earnings are firmly in their sights.