🟪 Cryptoland’s Trumpian wishlist

A crypto tax exemption could succeed next Congress

Michael McSweeney
November 28, 2024

_{Brought to you by:}

"Regulation needs to catch up with innovation."

— Henry Paulson

Cryptoland’s Trumpian wishlist

Cryptoland’s Trumpian wishlist is already starting to come true.

Last week, the SEC announced that Chair Gary Gensler would step down in January, just before Donald Trump takes office as the 47th president of the United States.

Trump’s election-season pledge to give Gensler the boot won him plaudits across the crypto space. Perhaps that was the easiest promise to deliver — agency leaders tend to slip out the door before an administration change-over, especially if a different political party is set to take the reins. Whether a looming expulsion or typical turnover pushed him out, only Gary can say.

What about the rest of the agenda?

There’s the much-balleyhooed strategic bitcoin reserve. Promises of pro-industry regulation. A "czar" or advisory team in the White House. The latter could materialize quite quickly; White Houses, as a rule, are apt to put together all kinds of advisory councils, though what influence they ultimately carry…only hindsight will tell.

Actions that require congressional blessing are another matter.

Potentially lost in the US election shuffle is the absolutely massive task awaiting the next Congress: addressing the bevy of tax cut expirations set for the end of next year.

Remember, Trump’s signature legislative achievement was the passage of tax cuts for businesses and individuals. In order to satisfy lawmakers who (at least performatively) care about deficits, only the business taxes were rendered permanent.

Now, those tax cuts with an expiration date — the individual ones — are up for debate.

And that’s on top of all the tax cut promises Trump made during the election, like the elimination of taxes on tips, Social Security benefits and other areas.

Simply put, there’s a Herculean task awaiting the next Congress. Unified Republican control probably means it’ll pass through, especially if lawmakers use a process known as budget reconciliation to move things through.

But with their small majorities in both chambers, GOP leaders will need to keep everyone on the same page — especially in the chaotic House Republican caucus.

Ultimately, I think they will. Trump’s dominance in GOP circles — and the corresponding concert that, if they step out of line, they’ll be primaried next election cycle — is almost certain to ensure his prioritized pass with little acrimony.

So where does crypto fit in here?

First, I think the different options on the table, especially the reserve, will get a fair discussion.

Does that ensure passage? No. In order to be included in a reconciliation bill, it will have to have a "direct" impact on the budget.

What I think can and will find its way into such a bill is a long-sought de minimis tax exemption for crypto transactions below a certain dollar threshold.

This has long been sought by crypto advocates, who say the current requirement — capital gains tax paid on every crypto transaction in the US — impedes its ability to serve as a common payment mechanism.

It’s been proposed before, to no avail. But with pro-crypto sentiment in Congress prevailing and the industry’s recent election-backing successes, such a tax exemption could be an easy win for the DC crypto lobby next year.

Such a measure could elsewhere be added to a crypto markets regulation bill, should it come up.

Again, it all depends on how much influence the crypto industry will be able to wield once Trump’s presidency begins. Further, the prospects of a crypto bill may depend on how the tax legislation process plays out next spring — and how potentially acrimonious those debates become.

As always, stay tuned.

— Michael McSweeney

Brought to you by:

Crypto is meant to be decentralized. But most enter through centralized exchanges and stay there. Magic Eden is changing that.

As the top NFT marketplace and Runes Exchange, we’re expanding to all tokens — memecoins, alts, and more. With fiat on-ramps, instant wallets, mempool protection, and cross-chain swaps, we deliver trustless, non-custodial trading.

This is crypto as it should be: permissionless, user-first, and fully on-chain.

Finding Crypto's Infra Limits and a Builder's Conviction Dilemma

Mike and Nick explore the looming stress test of crypto infrastructure and the psychological challenge of maintaining builder conviction. Tune in for a deep dive into how Celestia's lazy bridging and Gelato's sovereign rollup speak to the scaling challenges ahead.

Listen to Expansion on Spotify, Apple Podcasts or YouTube.