Representative Patrick McHenry, a Republican from the United States, sent a letter to the Treasury Department in which he asked for clarification on a portion of the digital asset tax that had been poorly drafted.Patrick McHenry, who will take over as chair of the United States House Financial Services Committee in January, has requested that the United States Treasury delay the implementation of a provision of the Infrastructure Investment and Jobs Act that deals with the collection of taxes on digital assets.On December 14, a letter containing questions and concerns regarding the scope of Section 80603 of the Act was delivered to Janet Yellen, who is the Secretary of the United States Treasury. The letter was sent by McHenry.In the letter, he asked for clarification on a section of the bill that deals with the taxation of digital assets and is scheduled to go into effect in 2023. He stated that the section was poorly written and could put people’s privacy at risk.According to him, the provision requires the government to recognize digital assets as the equivalent of currency for the purposes of taxation. This may put the privacy of American citizens at risk and have a negative effect on innovation.In accordance with the requirements outlined in the section of the tax code titled – Information Reporting for Brokers and Digital Assets, brokers are obligated to report specific information regarding their transactions involving digital assets to the Internal Revenue Service. This information must be provided in a specific format (IRS).There is a provision in the Act that mandates disclosure to the Internal Revenue Service of any digital asset transactions that are valued at more than $10,000 by any person or corporation that is engaged in commerce or business. The amount of $10,000 is the minimum that must be reported for this requirement.The requirement was contested at the beginning of this year by Coin Center, a non-profit advocacy organization that focuses on blockchain technology. The organization has taken legal action against the Treasury Department, arguing in their complaint that the regulation would subject people in the United States to an extensive surveillance program.On Twitter, Senator Rob Portman shared a letter from Jonathan Davies, the United States Assistant Secretary for Legislative Affairs, which stated that parties such as cryptocurrency miners and stakers are not subject to the new law. Portman is the one who actually mailed Davies’ letterAt the end of his letter, McHenry requested that the Treasury publish the regulations outlined in the section as quickly as possible and push back the effective date of the section in order to allow “market players” more time to comply with any additional obligations that may arise.This is the second correspondence that McHenry has sent to Yellen so far this year. On January 26, she received a letter from him in which he urged the Secretary of the Treasury to provide more clarification about the definition of a broker.
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Senate banking chair considers crypto prohibition
Senator Sherrod Brown of the United States argued that it would be very difficult to implement such a prohibition due to the fact that the activity in question would just move offshore.Sherrod Brown, the chairman of the United States Banking Committee, has proposed that the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) might maybe consider outlawing cryptocurrencies.In answer to a question that had been posed earlier by a presenter concerning Senator Jon Tester, who is of the opinion that cryptocurrencies need to be outlawed, Brown said that he is of the same opinion.The congressman from Ohio said that he has been warning his colleagues and the general public about the risks associated with cryptocurrencies for the last eighteen months, and he has been advocating for immediate and stringent action to be done.He said that he had previously approached the Treasury and the Secretary with his request for a comprehensive review of the situation by the whole government, including all of the many regulatory agencies.Brown noted the shocking collapse of FTX as an example of why it may be worthwhile to contemplate a ban, but he stressed that this is just one significant component of the whole issue.He argued that cryptocurrencies are risky and a threat to national security, and he cited North Korean cybercriminal activity, the trafficking of drugs and humans, as well as the financing of terrorist organizations, as some of the issues that have been exacerbated as a result of the use of cryptocurrencies.
Since the beginning of this year, the chairman of the Banking Committee has been vocal about his doubts towards cryptocurrencies. Most recently, he has highlighted his worries over the issues of stablecoin issuance as well as cryptocurrency advertising and marketing efforts.On November 23, Senator Tom Emmer made the statement that the breakdown of FTX was not a failure of cryptography but rather a failure caused by centralized actors.Emmer also holds the view that crippling regulation would stifle industry innovation in the United States, causing it to lose its position of global market dominance — something that many people believe is already unfolding. Emmer is a supporter of the American Competitiveness and Innovation Act (ACIA).
Next House Committee Chair Reintroduces Crypto Innovation Bill
If this proposal were to become law, businesses would have the legal right to negotiate an enforceable compliance agreement with specific departments or offices inside the federal financial regulatory agencies. In the event that such an agreement was reached, it would clear the path for more regulatory action.Rep. Patrick McHenry of North Carolina, who is currently the ranking member of the House Financial Services Committee and will chair the committee beginning in January, has reintroduced legislation with the intention of establishing innovation offices within government agencies that deal with financial services.In a statement that was released on December 19, 2018, McHenry stated that he has reintroduced the Financial Services Innovation Act, which is a piece of legislation that he had previously lobbied for in 2016 and 2019.The legislation was enacted with the intention of establishing, within the framework of the federal financial institutions that already existed, offices that would be able to assist innovators in the United States, including those working with cryptocurrencies and blockchain technology, in finding a way to comply with the regulations that were in place at the time. This was the primary objective of the legislation.According to McHenry, companies have the authority to apply for an enforceable compliance agreement with the offices of regulatory bodies such as the Securities and Exchange Commission and the Commodity Futures Trading Commission. An agreement of this kind would make it feasible for firms to move forward in a lawful manner without being hampered by antiquated or too onerous restrictions, which would be a significant benefit to these companies.He stated that the law had been fashioned after the regulatory sandbox program that was already in operation in the state of North Carolina.There have been earlier statements made by various government agencies, most notably the Office of the Comptroller of the Currency, regarding their ambitions to construct innovation offices that would specialize on fintech. These announcements have occurred in the past.The Securities and Exchange Commission (SEC) established the Strategic Hub for Innovation and Financial Technology in 2018, and it is more commonly referred to as FinHub. In 2020, the center will transition into an independent agency.
US House Committee Chair Criticizes SEC on Digital Assets
Patrick McHenry, the Chair of the United States House Financial Services Committee, has criticized the Securities and Exchange Commission (SEC) over its approach to digital assets. During an oversight hearing on April 18, McHenry used his opening statement to accuse the SEC of “punishing” digital asset firms through regulation by enforcement without a clear path to compliance. McHenry reiterated his calls for clear legislation on crypto and pressed SEC Chair Gary Gensler for a definitive answer on whether Ether (ETH) qualified as a security or a commodity.
McHenry expressed his concerns over the SEC’s actions, citing the lack of clarity and consistency in the regulatory landscape for digital assets. He accused the SEC of “chasing headlines” and penalizing companies without providing clear guidance on how to comply with regulations. McHenry also called on US lawmakers to create “clear rules of the road” for crypto through legislation.
During the hearing, McHenry pressed Gensler to give a definitive answer on whether Ether was a security or a commodity. He repeatedly interrupted Gensler’s responses that lacked specifics, citing the SEC chair’s previous labeling of Bitcoin (BTC) as a commodity and hinting at private discussions on Ether prior to the hearing.
“Clearly an asset cannot be both a commodity and a security,” said McHenry. “I’m asking you, sitting in your chair now, to make an assessment under the laws as exist, is Ether a commodity or a security?”
The question of whether Ether is a security has been a contentious issue for the crypto industry. In 2018, William Hinman, former SEC Director of Corporate Finance, stated that he did not believe Ether was a security. However, in December 2020, the SEC filed a lawsuit against Ripple Labs, claiming that the firm had sold unregistered securities in the form of its XRP tokens. The lawsuit sparked concerns among crypto enthusiasts that the SEC may also take action against Ether and other digital assets.
McHenry’s criticism of the SEC’s approach to digital assets reflects broader concerns over the lack of clarity and consistency in the regulatory landscape for crypto. The industry has faced regulatory challenges in several jurisdictions, with some countries, such as China and India, imposing outright bans on crypto trading and mining. However, other countries, including the US, are still grappling with how to regulate digital assets in a way that balances innovation and investor protection.
In conclusion, McHenry’s criticism of the SEC’s regulatory approach to digital assets highlights the need for clear and consistent regulations on crypto. While the industry continues to evolve rapidly, it is crucial that regulators provide clear guidance and support for companies to comply with regulations while fostering innovation in the sector.
Chairman McHenry Sharply Criticizes U.S. Treasury and IRS Over Digital Asset Reporting Proposals
Chairman of the House Financial Services Committee, Patrick McHenry, has publicly voiced his concerns over the Notice of Proposed Rulemaking on digital asset reporting requirements issued by the U.S. Department of the Treasury and the Internal Revenue Service (IRS). The proposed regulations, which were announced on August 25, 2023, are part of the Infrastructure Investment and Jobs Act.
Chairman McHenry stated, “The notice of proposed rulemaking on digital asset reporting requirements is another front in the Biden Administration’s ongoing attack on the digital asset ecosystem.” He emphasized that following the passage of the Infrastructure Investment and Jobs Act, lawmakers from both parties had clearly expressed that any proposed rule should be “narrow, tailored, and clear.”
While McHenry acknowledged the delayed effective date and exemptions for other activities in the proposed rule, which he said mirrored his bipartisan bill, the “Keep Innovation in America Act,” he also pointed out its shortcomings. “However, it fails on numerous other counts. Any additional rulemakings related to the other sections from the law must adhere to Congressional intent,” he added.
The Chairman further urged the Biden Administration to cease its efforts to undermine the digital asset ecosystem in the U.S. and collaborate with Congress to establish clear regulations for the industry. He expressed his commitment to advancing his bipartisan solution, the “Keep Innovation in America Act,” to rectify these reporting requirements, safeguard the privacy of market participants, and ensure the digital asset ecosystem thrives in the U.S.
Chairman McHenry is the lead sponsor of H.R. 1414, the “Keep Innovation in America Act,” which aims to amend the digital asset reporting provisions in the Infrastructure Investment and Jobs Act. The bill has garnered support from a bipartisan group of colleagues, including Rep. Ritchie Torres (NY-15).
For context, the proposed regulations by the Treasury and IRS aim to mandate brokers to report sales and exchanges of digital assets conducted by their customers. The regulations are designed to address ambiguities surrounding digital assets, including defining brokers and introducing a new reporting form, Form 1099-DA. IRS Commissioner Danny Werfel commented on the regulations, emphasizing their design to “end confusion involving digital assets” and ensure that “digital assets are not used to hide taxable income.”
Public feedback on these proposed regulations is open until October 30, 2023, with a public hearing scheduled for November 7, 2023.
There are widespread criticisms regarding the proposed regulations, in addition to those expressed by Chairman McHenry. Chye-Ching Huang from the Tax Law Center at NYU Law voiced concerns with an article titled “U.S. Will Likely Lose Billions Due to Unacceptably Long Delay for Digital Asset Reporting Requirements”, over the “unacceptably long delay” in releasing the proposed rules. The Center pointed out the decision to postpone full implementation of these requirements until 2026, a two-year delay from the original statute. They warned of the financial implications of this delay, suggesting that the Treasury and IRS might lose out on billions due to tax non-compliance for digital asset transactions in 2023 and 2024.
The Tax Law Center further emphasized that the Treasury and IRS had other viable options to implement these reporting requirements in a timely manner, allowing for public input and system development.
Breaking: Key US House Committee Leaders Challenges Federal Reserve on Stablecoin
The House Financial Services Committee’s top brass, including Chairman Patrick McHenry (NC-10), Vice Chairman French Hill (AR-02), and Chairman of the Oversight and Investigations Subcommittee, Bill Huizenga (MI-04), have formally expressed their concerns to the Federal Reserve Board (Fed) regarding its recent regulatory moves on payment stablecoins.
In a letter addressed to Fed Chairman Jerome Powell, the trio voiced their objections to the Fed’s recent supervision and regulation letters, specifically “Creation of Novel Activities Supervision Program” (SR 23-7) and “Supervisory Nonobjection Process for State Member Banks Seeking to Engage in Certain Activities Involving Dollar Tokens” (SR 23-8), both issued on August 8, 2023. The committee members believe these actions could potentially undermine the progress Congress has made in establishing a regulatory framework for payment stablecoins.
The letter highlights Congress’s understanding of the need for regulatory clarity in the digital asset ecosystem, emphasizing the “Clarity for Payment Stablecoins Act” as a bipartisan effort to provide such clarity. However, the Fed’s issuance of SR 23-7 and SR 23-8, shortly after the Committee’s endorsement of the aforementioned act, has raised eyebrows.
The committee members argue that the Fed’s actions, particularly through SR 23-7 and SR 23-8, seem to deter banks from issuing payment stablecoins or even participating in the stablecoin ecosystem. They further assert that the “Novel Activities Supervision Program” under SR 23-7 appears to impose additional regulatory burdens on banking institutions engaging with crypto-assets. This, combined with previous policy statements and decisions by the Fed, could lead to an implicit prohibition on banks’ involvement in the digital asset ecosystem.
Furthermore, the committee members pointed out that the Fed did not follow the notice and comment process as mandated by the Administrative Procedure Act when issuing SR 23-7 and SR 23-8. They view this as an attempt by the Fed to set policy without being accountable to market participants and the public.
Chairman of the House Financial Services Committee, Patrick McHenry has been aggressively working to protect laws governing digital assets because he believes that organisations like the Federal Reserve, the Treasury, and the IRS are undermining these laws. He criticised the Notice of Proposed Rulemaking on the requirements for reporting digital assets that was released by the Internal Revenue Service (IRS) and the U.S. Department of the Treasury on August 26, 2023 as a result of the Infrastructure Investment and Jobs Act. He referred to this as yet another effort by the Biden government to damage the American digital asset ecosystem and encouraged the government to work together with Congress to provide clear laws for the sector.
Widespread criticism has been levelled at the Treasury and IRS’s proposed rules, which would require brokers to disclose sales and swaps of digital assets made by their clients. The Tax Law Centre at NYU Law has also voiced its worries and warned of possible financial repercussions over the delay in adopting these measures.
In conclusion, as the ecosystem for digital assets develops, the struggle between Congress and regulatory agencies highlights the need for a well-defined strategy that protects both consumers and market players while ensuring the industry’s expansion.
Rep. French Hill Eyes Financial Services Committee Leadership Amid Crypto Focus
Arkansas Representative French Hill is positioning himself to take the helm of the House Financial Services Committee, a move that could significantly impact the oversight and regulation of digital assets in the United States. As the current chair of the recently established digital assets subcommittee and vice-chair of the full committee, Hill has been at the forefront of exploring and understanding the intricacies of cryptocurrency and blockchain technology.
The financial services committee plays a critical role in shaping policies that govern the nation’s financial institutions, including banks, lenders, and credit markets. With the explosive growth of the cryptocurrency market and the increasing interest in blockchain applications, the committee’s approach to these new technologies will likely affect how they are integrated into the broader financial system.
Hill’s leadership could mark a pivotal shift for the committee, which has conducted multiple hearings on crypto-related issues under his guidance. Notably, these hearings have delved into topics such as the potential for digital currencies to enhance financial services, the risks and benefits of emerging technologies, and the need for a comprehensive regulatory framework to ensure consumer protection and market integrity.
The departure of Representative Patrick McHenry, who has also shown interest in fintech innovation, leaves a vacuum that Hill is well-positioned to fill. Hill’s experience with digital assets could lead to a more nuanced and informed dialogue within the committee, potentially fostering a regulatory environment that encourages innovation while addressing the risks associated with digital currencies.
Hill’s potential leadership raises several questions about the future direction of cryptocurrency regulation. Will there be a push for more stringent oversight to protect investors from the volatility and potential fraud in the crypto space? Or will the committee lean towards a more laissez-faire approach to promote innovation and competitiveness in the global financial markets?
The implications of Hill’s ascension extend beyond the borders of the United States, as the country’s regulatory stance influences international norms and practices. As cryptocurrencies and blockchain technology become increasingly global, the decisions made by the House Financial Services Committee under Hill’s leadership could have far-reaching consequences for the industry worldwide.
As the situation unfolds, all eyes will be on Hill and the financial services committee to see how they will navigate the complex and evolving landscape of digital assets. With the potential for groundbreaking legislation and regulatory frameworks on the horizon, the committee’s actions will undoubtedly shape the future of finance in the digital age.