President Joe Biden’s budget, released Monday, includes proposals that would “modernize” tax rules for digital assets, and the administration expects the reforms to be part of a new revenue-raising effort that will reduce the federal budget deficit by more than $1 trillion over the next ten years.
The budget proposes changes to tax laws that would increase reporting requirements for certain taxpayers who own foreign cryptocurrency accounts and require financial institutions and digital asset brokers to report more information on their customers to the IRS.
The document also recommends changes to the law for taxpayers who are full-time dealers or traders of cryptocurrencies like bitcoin
and the total projected revenue raised by these changes amounts to $11 billion between 2023 and 2032.
The Biden administration is also seeking to spend an additional $52 million on its efforts to combat cyber threats, chief among them ransomware. The money would go to hiring more FBI agents and “enhanced response capabilities and analysis capabilities,” according to the budget document.
“These investments are in line with the administration’s counter-ransomware strategy that emphasizes disruptive activity and combating the misuse of cryptocurrency,” the budget reads.
Any changes to tax laws relating to cryptocurrency are likely to be controversial, given divisions in Congress over whether digital assets bring more benefits or risks to the U.S. economy and consumers.
The recently passed bipartisan infrastructure bill is projected to raise $28 billion over ten years through stricter reporting requirements that the IRS believes will help it collect more of the taxes Americans already owe.
A burgeoning crypto lobbying ecosystem fought the provision unsuccessfully, but has pledged to work with the Biden Treasury Department to ensure that it is implemented in a way that doesn’t place undue burdens on the crypto economy.