Bitcoin reaches record high, but White House set to ink new cryptocurrency tax

By Eric Johansson

Leading cryptocurrency Bitcoin has reached a new record high just as the White House is set to sign a controversial cryptocurrency tax into law.

In the early hours of Tuesday 9 November, the world’s biggest cryptocurrency broke its previous $67,700 peak. Bitcoin climbed to a record $68,519 high at 3.59am GMT. Other blockchain-based monies also reached new levels, such as ethereum, which soared to $4,837.

Analysts have identified fears over inflation as a key driver behind investors’ eagerness to invest in different digital currencies, particularly among younger investors who often favour “cryptocurrency as a hedge over gold”, as Wilfred Daye, the head of the trading platform Securitize Capital, told The Guardian.

“Most attribute the current all-time high levels to central banks maintaining low rates, making cryptocurrencies a popular hedge against inflation,” Nicklas Nilsson, thematic analyst at GlobalData and author of a recent thematic research report on blockchain, comments to Verdict.

“Low interest rates are generally viewed as supportive for riskier assets. However, there is a myriad of factors that are supporting the surge. A combination of strong supply dynamics and shortages, mining network recovery, relatively low network activity, rising global interest, and institutional investments into the crypto space and the underlying blockchain technology all have contributed to the market cap of cryptocurrencies approaching $3tn.”

The surge can also be attributed to a recent Ethereum system update and Square founder Jack Dorsey saying he is committed to making bitcoin “the native currency of the internet”.

Regulators around the globe have also arguably contributed to the popularity of blockchain cash.

Security watchdogs in the US and Australia have either given the green light to exchange-traded funds (ETF), or at least not stood in the way of them being launched.

Cryptocurrency enthusiasts are optimistic that all these factors will contribute to pushing the value of bitcoin beyond its current record levels.

“Bitcoin will maintain its strength and is likely to shoot further this week, possibly hitting fresh all-time highs, as this current ‘take off’ generates further interest and momentum, attracting even more retail investors,” says Nigel Green, CEO of financial advisory firm deVere Group.

Biden to approve cryptocurrency tax amidst bitcoin record

While bitcoin has reached a new record level, the White House is set to introduce a controversial cryptocurrency tax.

Congress passed the much touted $1.2 tn infrastructure package on Friday, marking one of President Joe Biden’s first major achievements.

The bill, however, includes regulations that requires brokers to report trader information on transactions of more than $10,000 to the Internal Revenue Service (IRS). As Verdict has previously reported, the Treasury introduced the new rules in May in a bid to bridge the $600bn gap of unpaid taxes the country suffered in 2019.

“Despite constituting a relatively small portion of business income today, cryptocurrency transactions are likely to rise in importance in the next decade, especially in the presence of a broad-based financial account reporting regime,” the US Treasury wrote in the report outlining the proposals.

In July, the provision was added to the Senate version of the bill. The decision was made after the Joint Committee on Taxation estimated that doing so would save $28bn of infrastructure costs over the next decade, The Verge reported.

With the bill passing Congress, it’s now up to the president to sign it into law. As of Monday, the White House would not provide a time-frame for that.

Cryptocurrency wonks have been less than optimistic about the rules, which is hardly surprising given the communities’ distaste for centralised control of the digital money.

The criticism against the bitcoin tax is, however, more to do with the lack of clarity as to who can be identified as a broker – does it refer to just exchanges like Binance and Coinbase, or also to miners and wallet developers?

Several legislators sympathetic to cryptocurrencies have criticised the tax and have attempted to introduce amendments that would make it clearer. Those amendments have been shot down.

In August, the Treasury said it would not target miners, a promise the cryptocurrency community is now expecting it to keep.