The Responsible Financial Innovation Act introduced by Sens. Cynthia Lummis and Kirstin Gillibrand would exempt cryptocurrencies that are below $200 from capital gains taxes. Here's what you need to know.
What Happened: After extensive dialogue on cryptocurrency taxation, this legislation seeks to permit under $200 worth of cryptocurrency gains free of taxation.
Lummis and Gillibrand initially suggested an exemption range of up to $600, which has now been revised down to $200. A key factor in this legislation with regard to cryptocurrency taxations is in reference to DAOs.
Decentralised Autonomous Organisations, according to the legislation, would be deemed business organisations that must exist with their own tax codes. Furthermore, DAOs would be formally structured under the jurisdiction of governmental laws, akin to LLCs or other businesses.
Another important distinction made for taxation is that gains from mining activities remain non-taxable unless the cryptocurrency mined has sold for fiat currencies.
Related Link: SEC Chair Gensler Says Crypto Exchanges 'Operating Outside Of The Law': What You Need To Know
Why It's Important: By providing tax breaks for capital gains up to $200, the bill would incentivize retail investors across the United States to enter this sector. Furthermore, by providing regulatory clarity, this legislation aims to smooth out the participation of retail investors, corporations, banks and companies in the industry of digital assets.
The de minimis exception of $200 will enable individuals to transact and secure purchases via digital currencies without having to report to tax authorities.
This could open the floodgates for a whole new frontier of retail investors.
