Eric Trump recently proposed a 0% capital gains tax on cryptocurrencies issued by projects based in the U.S. On the surface, this may sound like a win for crypto investors. But from a tax compliance and policy standpoint, this proposal is both impractical and risky.
At Chainwise CPA, we specialize in helping crypto investors navigate complex tax regulations. Here’s why we believe this kind of policy, though well-intentioned, would cause more problems than it solves.
Defining “U.S.-Based” in the Crypto World Is Nearly Impossible
In a decentralized industry like crypto, determining whether a project is “U.S.-based” is incredibly complicated. Many crypto protocols are launched by anonymous founders, governed by DAOs, or built by globally distributed teams.
Is a token considered U.S.-issued if it was developed by a U.S. founder? Or registered in a U.S. state? Or governed by a Delaware-based entity? What happens if it becomes decentralized or migrates its operations?
Creating a tax policy that depends on this definition would invite regulatory ambiguity and abuse—and open loopholes that are impossible for the IRS to monitor effectively.
A Policy Like This Would Distort the Market and Invite Abuse
Preferential tax treatment based on where a token was “issued” could create significant market distortions. Investors might choose tokens not based on their use case or fundamentals—but based on favorable tax status.
This could encourage founders to falsely label or structure their projects to appear U.S.-based, even when they are not. And once a token circulates on decentralized exchanges, who tracks its compliance status?
Policies like this invite regulatory arbitrage, increase noncompliance, and undermine the fairness of the tax system.
Crypto Tax Reporting Would Become Even More Complicated
From a crypto tax preparation standpoint, the proposal raises red flags.
Most crypto investors already struggle to track cost basis, fair market values, and taxable events. Crypto tax professionals like us are often brought in to do full account reconciliation across dozens of wallets, exchanges, and blockchains.
If this proposal became law, investors and CPAs would also have to determine whether every asset qualifies for 0% capital gains tax based on its origin. That data is rarely available—and even if it is, it’s subject to change or interpretation.
Crypto tax software would have to create and maintain a classification database of “U.S.-issued vs. non-U.S.-issued” tokens, which would be a data maintenance nightmare and lead to misreporting. Filing errors and IRS audits would likely increase.
What the Crypto Community Really Needs from Tax Reform
At Chainwise CPA, we believe the crypto community deserves thoughtful, practical tax policy. Rather than introducing arbitrary exemptions, we should focus on reforms that:
- Clarify cost basis and specific identification rules
- Provide safe harbor options for reporting uncertain transactions
- Address staking, airdrops, NFTs, and wrapped tokens with clear guidance
- Introduce de minimis exemptions for small crypto transactions
- Improve IRS reporting frameworks, such as Form 1099-DA accuracy
These reforms would reduce confusion, minimize audit risk, and make crypto tax reporting more manageable for both investors and professionals.
Final Thoughts
A blanket 0% capital gains tax on “U.S.-based” crypto assets might sound good in theory, but in practice, it would increase the complexity, compliance burden, and risk for everyone involved.
Instead of pushing headline-grabbing policies, let’s advocate for real, meaningful crypto tax reform—policies that bring clarity, consistency, and fairness to a growing and dynamic industry.
If you’re a crypto investor looking for guidance on account reconciliation, tax planning, or reporting strategy, contact us today for expert guidance and personalized crypto tax planning strategies that keep you compliant and optimized.