Crypto Industry Seeks Regulatory Clarity Post-Government Shutdown
In the wake of the recent government shutdown’s conclusion, the cryptocurrency sector is actively pushing forward with important regulatory appeals to the White House. As the year draws to a close, December emerges as a crucial month for digital currencies, especially under the administration of President Donald Trump, which has exhibited a positive inclination towards fostering cryptocurrency regulations.
Key Regulatory Needs of the Crypto Sector
On Thursday, November 20, the Solana Policy Institute took the lead by urging the Treasury and Internal Revenue Service (IRS) to take immediate action on several policy fronts. Positioned at the forefront of this initiative, the Institute’s letter underscores the potential for the Trump administration to enact significant changes that could yield swift benefits for the crypto industry even as Congress continues its legislative activities.
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The letter outlines several primary requests, with a prominent focus on achieving tax clarity. The industry is advocating for detailed guidelines on technical aspects like staking, mining, airdrops, cross-chain transactions, collateral pledging, and charitable donations. The goal is to align tax regulations with economic realities by preventing the taxation of unrealized income.
Moreover, the sector is urging the Treasury Department to redefine staking and mining rewards as property, taxable only upon disposition, drawing from established tax principles akin to those governing asset sales.
Regulatory Certainty and Innovation
Another significant demand is for regulatory certainty, with the industry seeking well-defined rules that support developers, DeFi protocols, and self-custody of digital assets. This includes advocating for no-action relief and safe harbors within existing regulatory frameworks.
The letter emphasizes the importance of safeguarding DeFi innovation, calling for updated guidance from the Financial Crimes Enforcement Network (FinCEN) and robust cybersecurity measures. These steps are vital for nurturing a thriving decentralized project ecosystem within the United States.
Furthermore, there’s a push for the IRS to recognize that blockchain-related activities, such as cryptographic engineering and smart contract development, should qualify for research and development tax credits.
SEC’s Token Safe Harbor Framework as a Model
A pivotal aspect of the letter involves seeking justice for Roman Storm, the developer of Tornado Cash, by urging the Department of Justice to drop charges against him. The signatories assert that such an action would demonstrate the administration’s commitment to safeguarding developers and acknowledge open-source software publication as a form of speech protected under the First Amendment.
The letter also advocates for enhancing US software development by promoting the adoption of safe harbors and regulatory sandboxes for DeFi projects and developers. This approach would facilitate the launch of tokens and protocols, spurring digital asset innovation through the creation of user-friendly web interfaces. The industry looks to SEC Commissioner Hester Peirce’s Token Safe Harbor Framework as an exemplary model for these proposals.
In addition to these appeals, there is heightened anticipation surrounding the upcoming Market Structure bill, designed to provide greater clarity within the digital asset landscape. Reports suggest that markup sessions for this crucial legislation are scheduled for early December, indicating potential major developments as the year concludes.
The latest market data shows a decline in the total crypto market cap valuation, dipping below the $3 trillion mark. This shift highlights the pressing need for regulatory clarity and innovation to propel the digital asset sector forward.
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