The United State’s Congress may enact one of the world’s first legislation on digital currencies after Jared Polis, a democrat from Colorado, and David Schweikert, a republican from Arizona, presented a bipartisan bill entitled the Cryptocurrency Tax Fairness Act of 2017.
CTFA is short at just three pages and appears to be a draft as it is probable clarification needs to be added on some aspects. The bill reads:
‘‘(a) IN GENERAL.—Gross income shall not include gain from the sale or exchange of virtual currency for other than cash or cash equivalents… The amount of gain excluded from gross income under subsection (a) with respect to a sale or exchange shall not exceed $600.”
Whether that $600 applies to one purchase, to one year, or perhaps for a lifetime, is not very clear, but that it is intended for one purchase may be indicated by this clarifying part of the bill:
“All sales or exchanges which are part of the same transaction (or a series of related transactions) shall be treated as one sale or exchange.”
That means if you buy two pair of jeans and a nice t-shirt, plus whatever else you add to the shopping cart, all of it is one transaction. However, congress may want to clarify that $600 applies per sale, or a series of related sales, to avoid lengthy court arguments and potential judicial interpretation.
It remains unclear when the bill will be discussed in Congress or if it allotted any time at all. If it is, then it would be the first such public discussion between lawmakers in the western world.
The main point of contention might be the concept of legal tender. The bill stays clear of it, but implies digital currencies are to be treated like any other non-usa state issued currency. In a press release, Polis, or his staff, says:
“The bipartisan legislation creates a structure for taxing purchases made with cryptocurrency. Similar to foreign currency transactions, it allows consumers to make small purchases with cryptocurrency up to $600 without burdensome reporting requirements.”
It has been more than a century since Congress discussed the concept of legal tender. A concept Hayek attacks considerably in the Denationalization of Money, a book that lays the intellectual foundations for this space. He says:
“If we want free enterprise and a market economy to survive (as even the supporters of a so-called ‘mixed economy’ presumably also wish), we have no choice but to replace the governmental currency monopoly and national currency systems by free competition.”
He calls on lawmakers specifically to not interfere with private money through such restrictions as double taxation or artificial concepts like legal tender.
To that extend, the $600 limitation is a step in the right direction, but far too little. The Republican controlled congress, together with their conservative counterparts in Britain, should instead move towards fully supporting Hayek’s insight and take an historical step in declaring private money as legal tender.
“The past instability of the market economy is the consequence of the exclusion of the most important regulator of the market mechanism, money, from itself being regulated by the market process… only competition in a free market can take account of all the circumstances which ought to be taken account of.” – Hayek in the Denationalization of Money.