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President-elect Donald Trump proposed to eliminate capital gains taxes on cryptocurrencies issued by US-based firms to stimulate the domestic digital asset market.
Donald Trump’s 2024 US election has erupted the crypto market and triggered one of the biggest bull markets in years. Bitcoin has reached an all-time high of nearly $93,000, XRP has hit its highest price in over a year, and the overall market cap has crossed $3trillion. Trump’s promise of extremely pro-crypto regulations and making the US a ‘crypto capital’ has influenced significant optimism in the market and renewed investors’ confidence.
Here’s a breakdown of Trump’s promises to reshape the US crypto market when he enters the White House in January.
No capital gains tax on US-based cryptocurrencies
A central aspect of Trump’s agenda is eliminating capital gains taxes on US-made cryptocurrencies, such as Bitcoin and XRP. This policy would exempt cryptocurrencies issued by US companies from capital gains taxation, encouraging their use in everyday transactions.
The policy would require legislative action to amend existing tax laws, specifically altering the Internal Revenue Code to exclude qualifying cryptocurrency transactions from capital gains taxation. The Internal Revenue Service (IRS) would then issue guidelines to define eligible cryptocurrencies and outline compliance requirements for taxpayers.
How will this impact businesses?
Cryptocurrency exchanges and businesses accepting digital assets would benefit from increased transaction volumes and user engagement. Companies involved in cryptocurrency mining and blockchain development might also experience growth due to heightened market activity.
However, the policy’s focus on US-made tokens could disadvantage foreign crypto firms operating in the US market. This would include popular assets like Ethereum and Solana.
How will this impact individual crypto investors?
Individual investors would gain the ability to use cryptocurrencies for purchases without incurring capital gains taxes, simplifying the use of digital assets in daily transactions. This change could lead to broader adoption of cryptocurrencies among consumers. Nonetheless, investors must remain vigilant regarding other tax obligations, such as income tax on crypto received as payment or through mining activities.
Overview of Trump’s crypto promises
During his 2024 presidential campaign, Donald Trump outlined several initiatives aimed at transforming the United States into a global leader in the cryptocurrency sector. His key proposals include:
- Establishing a strategic Bitcoin reserve: Trump proposed creating a national reserve of Bitcoin to integrate the cryptocurrency into the country’s financial strategy.
- Forming a Bitcoin and crypto advisory council: He announced plans to assemble a council tasked with developing transparent regulatory guidelines to benefit the cryptocurrency industry.
- Dismissing SEC chair Gary Gensler: Trump expressed intentions to remove the current Securities and Exchange Commission chair, citing a desire for more crypto-friendly leadership.
- Advocating for clemency for Ross Ulbricht: He supported granting clemency to Ross Ulbricht, the founder of the Silk Road marketplace, who is serving a life sentence for his involvement in the platform.
- Encouraging stablecoin expansion: Trump emphasized the importance of promoting the safe growth of stablecoins, digital currencies pegged to stable assets like the US dollar, while opposing the creation of a Central Bank Digital Currency (CBDC).
- Replacing income taxes with tariffs: Trump suggested substituting income taxes with tariffs as a primary revenue source, aiming to reform the tax system and potentially benefiting the cryptocurrency market.
The current US crypto taxation policy
In the United States, the taxation of cryptocurrencies is governed by the IRS, which classifies digital assets as property. Consequently, transactions involving cryptocurrencies are subject to capital gains taxes.
Corporate capital gains tax
Corporations are taxed on capital gains at the same rate as their ordinary income. As of 2024, the federal corporate income tax rate stands at 21%. Therefore, any capital gains realized by a corporation, including those from cryptocurrency transactions, are taxed at this rate.
Corporate income tax
The standard federal corporate income tax rate is 21%. This rate applies to a corporation’s taxable income, encompassing all revenue streams, including gains from cryptocurrency transactions.
- State taxes: In addition to federal taxes, corporations may be subject to state-level taxes, which vary by jurisdiction.
- Reporting requirements: The IRS mandates that corporations report all income, including that derived from cryptocurrency transactions. Accurate record-keeping is essential to ensure compliance and proper tax reporting.
