U.S. Crypto Projects Gain Tax Advantage, Cruz Challenges IRS DeFi Rule

• U.S.-based crypto projects will soon benefit from zero capital gains tax, boosting domestic blockchain innovation.
• Non-U.S.-based crypto projects face a ~30% tax rate, creating a competitive advantage for U.S. initiatives.
• Ted Cruz seeks to overturn an IRS rule mandating DeFi brokers to report user data, citing innovation and privacy concerns.

In a recent development for the U.S. crypto sector, Eric Trump confirmed an impending tax benefit for U.S.-based cryptocurrency projects. He announced that projects like XRP and HBAR would qualify for zero capital gains tax, distinguishing them from non-U.S.-based projects, which will face a ~30% tax rate. This shift is expected to create a more favorable environment for domestic blockchain innovations.

Zero Capital Gains Tax for U.S.-Based Crypto Projects

The announcement establishes a tax framework promoting U.S.-based blockchain projects. Zero capital gains tax on these projects could encourage innovation while attracting new investments. 

The policy, set to impact major players such as XRP and HBAR, aims to make the U.S. a competitive hub for blockchain development. Meanwhile, non-U.S.-based projects will face a significant 30% tax, creating a stark contrast that may influence global project strategies.

Ted Cruz Targets IRS DeFi Reporting Rule

Senator Ted Cruz plans to introduce a resolution next week to challenge a controversial IRS rule targeting decentralized finance (DeFi). The rule, finalized in December, requires certain DeFi brokers to report user data, including names and addresses, through Form 1099 filings. This mandate aligns DeFi brokers with traditional securities brokers, drawing criticism from industry leaders and lawmakers.

Cruz argues that the rule hinders innovation by imposing centralized regulatory frameworks on decentralized systems. He also highlights privacy concerns stemming from data reporting requirements, asserting that such measures undermine the decentralized ethos of blockchain technology. This resolution under the Congressional Review Act seeks to reverse the regulation and align policies with innovation-friendly practices.

These developments signal growing regulatory support for blockchain innovation within the U.S. By eliminating capital gains taxes for domestic projects and potentially curbing restrictive IRS rules, the government may foster a more favorable environment for blockchain advancements. The outcome of Cruz’s efforts could set a precedent for balancing innovation, privacy, and regulation in the crypto industry.