Tax policies in digital assets should focus on enabling and encouraging the deployment of blockchain and cryptocurrency resources instead of treating them as a hindrance to growth, said BX3 Capital partner Michael Minihan, who has more than experience as an international tax practitioner.
He said, “The promise of the blockchain and the rise of cryptocurrencies could transform the global economy. Historical leaders of the world's most revolutionary innovation have called—and continue to call—the US their home. In addition, with ownership of the world's largest and most robust capital markets, it is clear that the US possesses all of the key resources to lead the global economic transformation.”
Minihan analyzed the Internal Revenue Code and noted at least six pages, out of the estimated 70,000 pages of document, were dedicated on digital assets. The guidance on cryptocurrency is nearing its fifty years even as the crypto space is evolving daily.
He said all US tax legislation is aimed at raising funds for the government as well as achieving some specific economic objective. In the context of digital currencies, space offers revenue raising opportunity for the government, but he posted a question about the future of the space is the present "no real policy" policy is maintained.
At present, a majority of digital currency transaction has conceptual taxability from US tax agencies.
“At the same time, there is also an opportunity to promote innovation, growth, and technological advancement. Assuming long-term economic growth is preferable to short-term tax revenue generation, some concrete steps can be taken to bolster the development of this burgeoning industry,” Minihan added.
He explained that all legislation revolving around this emerging technology should have the following fundamental goals to achieve economic growth: Promote innovation, support economic development, encourage adoption of technology, ensure sufficient and useful disclosure, and equitable generation of tax revenues.
He said as token issuances become more sophisticated, with a majority of them treated as securities for tax purposes, there are several contributors to the community have made the necessary adjustments. Minihan pointed out that where security is closely similar to an equity instrument, the treatment of the token issuance should be consistent with an actual equity offering.
He stressed, “In other words, the Initial token offering, should not be a taxable event for the issuer, just like an initial public offering should not be a taxable event for the issuer.”
But while the US has issued taxation guidance on digital assets, the British government has adopted a “passive observer” of the cryptocurrency market with little interest in assessing the impact of the asset class might have on the nation’s blockchain industry.