Ambiguous Policy & Tuesday's Primary: Where Crypto Stands in it
Plus Germany and Portugal on crypto-taxation and political campaign donation rules in California.
Twali Wrapped is a community-driven initiative tracking the most important developments of the past week for policy, regulation, compliance, and legalities, related to web3.
In addition, we speak with experts toiling with how best to implement regulation and policy changes, while prioritizing simplicity in communication to ensure our reader’s complete understanding of the implication of such developments.
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The Docket
Welcome to the Docket - A Bulletin Board of the most important legislation either proposed or passed in the past week.
Passed: Germany’s Crypto Income Tax
Germany’s Federal Ministry of Finance announced that sales of crypto assets held for one year would not be subject to capitals gains tax. The same goes for staking and lending. This is a major tax revision, as previous rules stated that individuals had to hold crypto-assets for 10 years before selling tax-free.
Key Takeaways. This 180° turn places Germany as one of the more crypto-friendly regions in Europe, at least in regard to taxation. But the key takeaway is that taxation of crypto remains a murky puddle at best in many countries, so Germany’s decision might inspire others to follow in suit.
Proposed: Portugal’s Tax Plan for Crypto
In the past, Portugal has been heralded as a “crypto tax haven.” The country previously viewed crypto not as an asset, but as a form of payment—thus, individuals were not charged income tax on crypto transactions (businesses, on the other hand, were subject to tax rates of 28-35%).
Now, Portugal's Minister of Finance, Fernando Medina, has proposed a capital gains tax on individuals selling crypto assets. Medina also suggested crypto assets could become subject to a VAT and other taxes—but those are still TBD.
Key Takeaways. Crypto taxes in Europe are hot this week, and while we will see Germany becoming more crypto-friendly, the opposite is true for Portugal. As countries self-identify as for or against crypto, tax rules will play a critical role in crypto adoption and public opinion.
Proposed: Crypto Campaign Donations in California
Thursday morning, the California Fair Political Practices Commission (FPPC) discussed the use of crypto in political campaign contributions, which has been prohibited since 2018. Members of the Senior Commission Counsel proposed two alternative rules:
Regulate cryptocurrency contributions as cash contributions.
Permit cryptocurrency contributions as in-kind, or non-monetary, contributions requiring committees to convert contributions to cash upon receipt.
These rules, plus the prohibition that currently stands, will be revisited by the FPPC in early July.
Key Takeaways. Currently, 9 states (including California) in the U.S. prohibit crypto donations, while 12 states allow candidates to accept crypto for political campaigns. The rest have made no such comments or rulings. However, given that crypto is becoming synonymous with some candidates and a hotbed for political debate, its use in political financing is likely to become more mainstream, or at least more debated, throughout the country.
Tuesday’s Primary through a Crypto Lens
On Tuesday, the U.S. electorate came one small step closer to the 2022 midterm elections. Primary elections in several key states provided plenty of drama – and in the case of Pennsylvania, the drama on the Republican side looks set to drag on for a couple of weeks.
The night’s events also got the team at Twali Wrapped wondering: How do the candidates flashing across television screens stack up on cryptocurrency and decentralized finance (DeFi)?
The quick answer is that we still are not entirely sure. Candidate websites are generally long on platitudes and short on substance. Nearly every candidate we reviewed makes some inference to supporting economic prosperity and expanding opportunities for middle-and low-income families (values that many crypto enthusiasts share). Still, specific policy proposals are virtually nonexistent. Hoping for crypto details amidst a sea of generalities would be a fool’s errand.
The most direct ties to the crypto and DeFi space come from Madison Cawthorn (R-NC) and John Fetterman (D-PA). Cawthorn, an incumbent, was defeated in the North Carolina District 11 primary by state senator Chuck Edwards. Unfortunately, the former House Representative did not demonstrate the most nuanced views on the subject. In one seemingly-random Tweet in 2021, he asked, “Why do we not use cryptocurrency as the new gold standard?” Many Bitcoiners advocate for the “BTC-as-digital-gold” use case, but it is hard to see that view coming through in Cawthorn’s one-off tweet. Meanwhile, Cawthorn’s other claim to crypto fame was promoting the Let’s Go Brandon Coin, a meme coin (and apparent rug pull) currently trading at a fraction of a penny.
The crypto posture seems more promising for Fetterman, the newly crowned Democratic candidate for the U.S. Senate in Pennsylvania. Politico reported that a web3 super PAC spent $200,000 on television ads supporting Fetterman in the lead-up to the primary. The move left many in the crypto sphere (including us) scratching their heads. A Fetterman spokesperson quoted in the same article noted that the candidate views super PACs as exemplars of a “broken and dysfunctional” system — but clearly the folks writing the checks saw something in Fetterman they liked.
The other stars of the show on Tuesday night also hail from Pennsylvania. Former television doctor Mehmet Oz and hedge fund manager David McCormick are locked in a pitched battle for the Republican Senate candidacy. The vote seems destined for a recount. Yet neither candidate has provided any indication of where they might stand on DeFi policy.
Interestingly, both candidates list “Growing the Economy” as a key policy plank on their respective websites. Their main gripe seems to be with inflation, which rose to over 8% in April 2022 compared to the year prior. Cryptocurrency may eventually serve as a useful inflation hedge — but today is not that day. The price volatility of digital assets make it a poor choice for protecting value in the short-term. But that does not mean the DeFi sector does not have anything to offer candidates and legislators at present.
Given the shared, bipartisan interest in creating jobs and growth, better data on crypto’s economic impact can help inform engagement in the public policy arena. Industry trade associations are not blind to this reality. In fact, efforts to quantify crypto’s contribution to U.S. prosperity are currently in the works. With the political silly season heating up, it cannot come soon enough!
Politician Crypto Stance Tracking
Primary season is upon those of us in the U.S. To keep up to date on politicians and their public opinions on crypto, we’ve created the Politician Crypto Stance Tracking sheet to follow their crypto-related public statements and policy proposals.
Call to action. We are asking the Twali Netwerk to add to this repository to capture the full scope of the political crypto landscape — in the US and internationally. Contribute to the tracker by adding an entry for politicians who have caught your eye in the crypto debate.
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