In January, after Donald Trump’s inauguration, reports appeared to claim that his son, Eric Trump, had confirmed that US-based Cryptocurrencies would eventually be exempt from capital gains, while non-American cryptocurrencies would have a treasure of 30%.
Removal of capital gains taxes on US-based cryptocurrencies may sound like a dream come true for US investors, but it doesn’t come without a price. Whether it becomes a net negative for the global crypto industry – yes, we just have to wait and see.
But there are some shiny red flags.
1. Markets can wing after confirmation.
If this new rule is actually approved and comes into force, you must be prepared for market turbulence as US investors could dump non-American cryptos, take the treasured hit and rotate some of their capital for domestic options. This can increase sales pressure on global projects, especially those with significant US exposure to the investor.
But that would be the least of the worries-this could have far-reaching, long-term consequences for the entire crypto industry.
2. Making this change before sound rules are in place can be harmful.
This elimination of cryptoin -investment taxes could trigger an increase in the creation of new cryptocurrencies from the US, corresponding to 2017 initial coin tender (ICO) Boom – where almost 80% of the projects had collapsed or proved to be fraud within two years. If the US government removes capital gains tax before implementing clear and solid rules, we could see a repeat of this chaos, but on a much larger scale.
A zero -capital wake tax would almost certainly lure in US retail investors that have never deeply in crypto, drawn by the obvious tax benefit. But if bad actors flood the room and take advantage of them, it can drive these newcomers away from crypto completely.
3. Potential damage to the global crypto industry.
The United States may be home to major crypto projects such as Cardano (ADA), Solana (Sun), XRP (XRP) and Hedera (HBAR), but it has also been a breeding ground for fraud -tokens. By 2024, the FBI even issued a warning of criminals who created fake crypto -tokens who imitated legitimate, offering unsuspecting investors.
In addition, Global Crypto-Startups may have a more challenging time to secure funding if US Venture companies begin to favor local projects to maximize tax-free returns on token allocations. This can drain investments from new markets where crypto is often used for the real world’s economic inclusion. Such a change is also likely to bring many US companies home after they left because of SEC’s enforcement-tongue approach during the Biden administration.
Even if other countries jumped on the bandwagon with their own zero capital gains tax for local cryptos, it may be beating back. The market is likely to be flooded with new tokens, trade would be more fragmented and liquidity would dry up for most of them. While countries such as UAE and Cayman Islands already have zero-capital gains tax on crypto, they use it universally, not only on locally created crypto-tokens.
Conclusion
The United States, which takes this approach, risks lacing the market, incentive artificial creation of token and isolate US investors from the global crypto economy. What looks like a fiscal break now may end up killing competition, pumping money into scams and harming Crypto’s credibility in the long run.
