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Has a 1% tax on Bitcoin holders been proposed by a U.S. Senator?

Has a 1% tax on Bitcoin holders been proposed by a U.S. Senator?

In the morning of Monday, April 22, Dennis Porter, the CEO, and co-founder of the Satoshi Action Fund, caused a stir on X as he shared a supposed letter sent by Senator Elizabeth Warren to President Biden.

The letter detailed a proposed piece of legislation titled the ‘Cryptocurrency Reporting and Wealth Tax Act’ and urged its implementation.

In the document, Senator Warren highlighted that digital assets present both opportunities and challenges but focused on the problems of taxing digital assets and enforcing existent rules in the crypto market.

As a result, the proposed act would introduce requirements for any individual or entity holding more than $1,000 worth of Bitcoin (BTC) or other cryptocurrency to the Internal Revenue Service (IRS).

As part of the goal of the proposed legislation is to tackle wealth inequality in the U.S., the bill would also entail a wealth tax on crypto assets. 

The wealth tax would, however, apply only to individuals and entities that hold more than $500,000 worth of Bitcoin or any other cryptocurrency and would amount to 1% of their value. 

There was one issue, however, and an issue Porter himself quickly caught onto – the entire thing was fake.

Still, much like the CEO of the crypto advocacy group initially stated his organization would vehemently oppose any such law, in the correction post, he said that ‘the sad part is that it is beyond believable that she would make these types of policy suggestions.’

Is a punitive crypto tax coming?

While the ‘Cryptocurrency Reporting and Wealth Tax Act’ is, at this stage, a hoax, a similar piece of legislation might be closer than many would like. Indeed, in recent years – particularly after the catastrophes of Terraform Labs’ and FTX’s collapses – regulators have generally been hawkish, and the IRS is keen to tax cryptocurrencies more efficiently.

For example, there has been significant chatter late in 2023 over Warren’s ‘crypto crackdown’ bill, though she isn’t the only official attempting to place digital assets under increased scrutiny.

Money laundering and terror financing have been of particular interest to the U.S. Treasury while US Senators Cynthia Lummis and Kirsten Gillibrand have introduced the Lummis-Gillibrand ‘Payment Stablecoin Act,’ with the aim of regulating stablecoins more tightly.

Despite all of this, along with the misspelling of Warren’s name on the hoax letter, what betrays it the most is the wealth tax section, which, while its worst – or best – part depending whom you ask, is extremely unlikely to be proposed in the U.S. and even less likely to pass given the can of worms it would open.

Additionally, despite the efforts to crack down against the crypto market at the federal level, most of the proposal have so far led nowhere in stark contrast to pro-crypto state level legislation – frequently backed by Porter’s own Satoshi Action Fund – with the most recent example coming in the form of a landslide victory in Louisiana.

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