TAX ALERT |
On Wednesday, March 9, 2022, the White House released the Executive Order on Ensuring Responsible Development of Digital Assets (EO) and Fact Sheet. While this EO is written in fairly broad terms, it recognizes that digital assets present potential risks as well as potential benefits. The EO asks a variety of regulators and agencies to prepare reports on the risks presented by digital assets in an effort to develop a strategy for digital asset regulation going forward.
As highlighted in these documents, digital assets have grown exponentially, with market capitalization of digital assets growing from 15 billion to 3 trillion in the past five years alone and continuing to grow. Given this rapid growth and the relatively limited guidance regarding the treatment of digital assets, the White House recognizes the need for regulation in this area in order to ensure stability in the economy and consumer safety. Additionally, recent events in the Ukraine have highlighted the potential for countries to avoid economic sanctions through the use of digital assets. The EO demonstrates that the White House recognizes the need to protect against potential national security risks as well.
The EO asks a variety of federal government agencies and regulators to propose rules to regulate digital assets. The EO specifically requests recommendation regulations needed to:
- Ensure the protection of businesses, consumers and investors.
- Protect the global financial market in order to promote stability.
- Mitigate any national security risks associated with the misuse of digital assets (e.g., money laundering, cybercrime, evasion of sanctions, etc.).
- Continue to promote US leadership and the global economy, particularly as it relates to digital assets.
- Ensure safe, affordable and equitable access to financial services.
- Consider the potential of a Central Bank Digital Currency (CBDC defined under the EO as “a form of digital money or monetary value, denominated in the national unit of account, that is a direct liability of the central bank”) system in the US.
While the EO does not focus specifically on the taxation of digital assets, the EO contains broad direction to the Treasury Department and other agencies to develop a framework for interagency international engagement with their foreign counterparts to enhance “global compliance” which presumably would include compliance with U.S. and foreign tax laws. Taxpayer should expect proposals designed to enhance global tax compliance and information reporting and to enhance global cooperation around digital asset taxation.
Taxpayers should expect to see proposals in response to this EO in the next one to two years.
RSM has a robust team of professionals who will be able to provide various levels of support to clients with digital assets. Our team will continue to monitor this space and will provide updates as they develop.
Questions or Want to Talk?
Call us directly at 972.221.2500 (Flower Mound) or 940.591.9300 (Denton),
or complete the form below and we’ll contact you to discuss your specific situation.
This article was written by Ramon Camacho, Jamison Sites, Melanie Gulden and originally appeared on 2022-03-14.
2021 RSM US LLP. All rights reserved.
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
KHA Accountants, PLLC is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.
For more information on how KHA Accountants can assist you, please call 972.221.2500.