TAX ALERT | March 14, 2022 | Authored by RSM US LLP
While this EO is written in fairly broad terms, it recognizes that digital assets present potential risks as well as potential benefits. The EO asks a variety of regulators and agencies to prepare reports on the risks presented by digital assets in an effort to develop a strategy for digital asset regulation going forward.
As highlighted in these documents, digital assets have grown exponentially, with market capitalization of digital assets growing from 15 billion to 3 trillion in the past five years alone and continuing to grow. Given this rapid growth and the relatively limited guidance regarding the treatment of digital assets, the White House recognizes the need for regulation in this area in order to ensure stability in the economy and consumer safety. Additionally, recent events in the Ukraine have highlighted the potential for countries to avoid economic sanctions through the use of digital assets. The EO demonstrates that the White House recognizes the need to protect against potential national security risks as well.
The EO asks a variety of federal government agencies and regulators to propose rules to regulate digital assets. The EO specifically requests recommendation regulations needed to:
While the EO does not focus specifically on the taxation of digital assets, the EO contains broad direction to the Treasury Department and other agencies to develop a framework for interagency international engagement with their foreign counterparts to enhance “global compliance” which presumably would include compliance with U.S. and foreign tax laws. Taxpayer should expect proposals designed to enhance global tax compliance and information reporting and to enhance global cooperation around digital asset taxation.
Taxpayers should expect to see proposals in response to this EO in the next one to two years.
RSM has a robust team of professionals who will be able to provide various levels of support to clients with digital assets. Our team will continue to monitor this space and will provide updates as they develop.
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This article was written by Ramon Camacho and originally appeared on Mar 14, 2022.
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