China Declares Crypto Illegal

There was a steep drop in the price of Bitcoin and other Cryptocurrencies this past week, with Bitcoin’s price dropping roughly $5,000. This decrease happened almost immediately after China’s central bank declared all cryptocurrency-related transactions, and mining illegal. This does not come as a huge surprise, as China has taken a very tough stance against digital currencies in attempts to protect its central bank.

A few years prior to China declaring these transactions illegal, the Country banned them from happening within its borders. Even with the ban, citizens found ways to trade digital currencies using several different methods. Now, China is pledging to crack down on these now illegal financial activities related to cryptocurrency.

Virtual currency mining was a large business in China, accounting for over half of the world’s supply. Now, there will likely be a larger push related to China’s own virtual currency the digital Yuan; which was developed to allow for China’s central bank to control and monitor transactions. The digital Yuan is the opposite of other cryptocurrencies as it doesn’t allow for the anonymity of users. It will be interesting to see the long-term effects of this declaration moving forward.

Higher Threshold for Potential Bank Reporting

Democrats are still looking to have banks report on accounts to the Internal Revenue Service. This reporting was previously wanted on all accounts with over $600 or with $600 worth of transactions, which would provide the IRS information on most accounts. Richard Neal made a statement this past Thursday stating, “We’ve reached an agreement to not have the $600.” Following this there were talks of raising the threshold to around $10,000, however, this is still in position to change.

Bank reporting’s goal would be to assist the IRS in collecting tax dollars from entities without third-party reporting like a W-2. The U.S. Treasury estimates tax compliance is around 99% for income where there is this third-party reporting. When there is no third-party reporting the Treasury estimates only around 45% of total income is reported. This being said those who would be affected most by this would likely be small businesses or other streams of revenue such as rental income.  

Potential Carbon Tax

Politicians are divided on the potential implementation of a carbon tax. There has been a recent push for the Senate to draft a tax on carbon dioxide pollution as an additional way to fund Biden’s proposed $3.5 trillion budget. The goal of a carbon tax would be to not only generate revenue but to speed up the transition to renewable energy resources. A written proposal would need to be complex to respect Biden’s promise to not raise taxes on those earning under $400,000.

Even if taxes are not raised on those earning under $400,000, all Americans would likely see a price spike on non-renewable energy resources. There would also need to be some sectors protected by an exemption, especially those who are energy-intensive to protect Americans from increased prices. A potential carbon tax is currently still in early stages, but definitely something to keep an eye on.

Thoughts? Give us a call at 516-541-6549, visit our website for more news updates, and don’t forget—have a great week!

Tom Long
Associate, Creative Solutions

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