Digital assets face regulations overhaul with RFIA

Cryptocurrency taxation and oversight rules would face overhauls under proposed legislation working its way through Congress.

The Responsible Financial Innovation Act (RFIA), a bipartisan bill sponsored by Sen. Cynthia Lummis (R-WY) and Sen. Kirsten Gillibrand (D-N.Y.), is the federal government’s biggest attempt so far to modernize digital assets.

Under the RFIA, the Commodity Futures Trading Commission (CFTC) would have exclusive jurisdiction over digital assets, although with several exclusions. The bill would also create an exemption to permit the purchase of virtual currency without accounting for and reporting income, and it would clarify that “miners” and other validators aren’t considered brokers for income tax purposes.

Other pieces of the legislation would impact individuals and actions related to digital assets, including:

• Gain or loss from disposition of virtual currency, such as Bitcoin
• Information reporting requirements imposed on brokers with respect to digital assets
• Sources of income through digital income
• Decentralized autonomous organizations
• Tax treatment of digital asset lending agreements and related matters
• Implementation of effective IRS guidance
• Analysis of retirement investing in digital assets
• Digital asset mining and staking

Although the RFIA has bipartisan support, it’s not expected to be up for vote until the next session of Congress begins in January 2023.

Regulations surrounding the use of digital assets can often be confusing, but we can help. Reach out to me or a member of our tax services team with your questions.

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