POLAND – 2024/11/06: In this photo illustration, Donald Trump’s X account is displayed on a … [+] smartphone with Bitcoin logo in the background. (Photo Illustration by Omar Marques/SOPA Images/LightRocket via Getty Images)
SOPA Images/LightRocket via Getty Images
The question of whether Bitcoin and other cryptocurrencies should be subject to capital gains taxation has been bandied about for years, but has found renewed interest since former President Trump won a second term. The typical argument for capital gains treatment being inappropriate for cryptocurrencies is an assumption, in contravention of current tax policy, that they are currencies—and that currencies are not subject to capital gains tax.
This is partly true, but not for the reasons proponents think, as profits from currency exchanges are by default taxed as ordinary income under Internal Revenue Code (IRC) Section 988. This would mean any profit made from currency exchanges, including cryptocurrencies if they gain currency treatment, would be subject to taxation at ordinary income tax rates. Of course, as the top capital gain rate is 20% while the top income tax bracket is 37%, holders of cryptocurrencies in the upper income brackets would be none too pleased with this outcome.
That said, if a foreign currency is held as an investment and an election is made by a taxpayer under IRC Section 988(a)(1)(B) prior to any transaction occurring, it is possible for currency exchanges to receive capital treatment.
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Advocates for excluding cryptocurrencies from the capital gains regime in favor of treating them as more traditional currencies, however, seem to be misunderstanding the effect and assuming that would mean gains on cryptocurrencies would not be taxed. In fact, by default, they’d be taxed at the potentially higher ordinary income rates.
Eliminating Tax on Bitcoin
It is clear what advocates for cryptocurrency tax reform are really hoping for is tax exemption.
However, there is no policy rationale for eliminating taxes on Bitcoin or any other cryptocurrency. At best, cryptocurrencies function as currencies—but ones with an incredibly inefficient and resource-intensive minting process and for which the very use creates externalities.
Unlike traditional fiat currencies, whose creation and transaction costs are relatively minimal, cryptocurrencies like Bitcoin require significant computing power, electricity, and the resulting environmental impact to maintain. Even cryptocurrencies that rely on more efficient systems than Bitcoin’s proof-of-work are still more resource-intensive than minting a nickel. This inefficiency undermines the argument that cryptocurrencies should enjoy the incentivizing power of complete exemption from taxation.
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Moreover, cryptocurrencies lack the stability and governmental backing of traditional currencies, which makes them speculative assets rather than conventional mediums of exchange—regardless of what you call them.
Given that cryptocurrencies can and do function in the economy in a manner similar to other investment assets—like stocks or real estate—exempting them from taxation would create an inequitable tax environment. Other investment vehicles that generate a profit are subject to tax, and granting an exception for cryptocurrencies would simply endorse them as a special class of untaxed speculative wealth—a precedent with no underlying policy goal beyond boosting the wealth of those that hold it.
Economic and Social Realities of Tax-Exempt Crypto
There’s no precedent for the special treatment proposed for cryptocurrency gains, as no other asset class is exempted from tax solely for speculation. Municipal bonds are the closest comparison, but they differ in purpose and impact.
Municipal bonds are traditionally tax-advantaged to encourage investment in local and state infrastructure and keep the cost of municipal borrowing as low as possible. Tax exemptions on the interest from these bonds incentivize investors to support public projects which benefit society as a whole. Cryptocurrency holdings provide no such benefits.
A tax exemption for cryptocurrencies would almost certainly disproportionately benefit high-income individuals, further exacerbating wealth inequality. Much of cryptocurrency wealth is highly concentrated among a small group—with large holdings by early adopted and institutional investors. Placing cryptocurrencies on par with municipal bonds in terms of tax treatment would be a huge tax break grant to well-capitalized groups, rather than toward investments in social projects—depending economic divides.
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There is also the tax revenue loss to contend with—as capital gains from cryptocurrencies are a growing revenue source for governments, particularly as the market for these assets expands. This revenue loss would likely need to be offset by shifting the tax burden onto wage earners and businesses or by reducing public services and infrastructure investments. I
Cryptocurrency Tax Policy Realities
The reality is that most of the proponents of eliminating capital gains tax treatment on cryptocurrencies—beginning with former President Trump and extending to others in his political sphere—likely do not fully understand the implications of their proposals. Statements from these advocates reveal a fundamental misunderstanding of the current tax system as they seem to believe that by treating assets like Bitcoin as currency, their gains would be rendered tax-free. In reality, however, shifting cryptocurrencies to “currency” treatment would, by default, subject profits to higher tax rates.
This misconception stems from an incomplete, or wholly lacking, grasp of tax law fundamentals. By framing cryptocurrencies as currency without understanding the tax implications, they risk promoting a policy that would, in practice, often result in taxing these assets more heavily—rather than less. This is emblematic of their broader policy understanding and corresponding vision.
In conclusion, while cryptocurrency itself is undoubtedly volatile, tax policy should be anything but. Any fundamental alteration to cryptocurrency tax treatment should be based on a thorough analysis and a compelling rationale, rather than mere hunch or political impulses.
Robert Kiyosaki Warns Of Bitcoin In Black Rocks ETF: 'I Love Bitcoin In My Wallet, I Would Not Trust It In Black Rocks ETF. It Is Suppressing Bitcoin Price'
Renowned financial educator and author Robert Kiyosaki has predicted a significant surge in Bitcoin‘s BTC/USD value by 2025, while expressing distrust in Black Rock’s handling of the cryptocurrency.
What Happened: In a post on X on Friday, Kiyosaki voiced his concerns about Larry Fink, the head of Black Rock, and his handling of Bitcoin.
He accused Fink of being a “Marxist” and a “Share Holder Capitalist,” suggesting that such individuals are suppressing Bitcoin’s price for personal gain.
“Larry Fink dumping Bitcoin. VIVEK warned Larry Fink of BLACK ROCK is a Marxist. Vivek warned Fink & Black Rock are Share Holder Capitalist not Stake Holder Caplitist. Share Holder Capitalists are Marxist….like Klaus Schwab who state: “Someday you’ll own nothing and you’ll be happy,” he wrote in the post.
Also Read: Kiyosaki Warns of Global Financial Crisis: ‘Protect Your Wealth by Investing in Real Assets’
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Larry Fink dumping Bitcoin. VIVEK warned Larry Fink of BLACK ROCK is a Marxist. Vivek warned Fink & Black Rock are Share Holder Capitalist not Stake Holder Caplitist. Share Holder Capitalists are Marxist….like Klaus Schwab who state: “Someday you’ll own nothing and you’ll be…
Kiyosaki further stated his preference for keeping Bitcoin in his own wallet, expressing distrust in Black Rock’s Bitcoin ETF. Despite his criticisms, Kiyosaki remains bullish on Bitcoin, predicting it will reach $350,000 in 2025.
“I love Bitcoin in my own wallet. I would not trust Bitcoin in Black Rocks ETF. Black Rock suppressing Bitcoin price so the whales can buy Bitcoin at under $100k. I will keep buying more Bitcoin because Bitcoin going higher. I predict Bitcoin to hit $350 k in 2025,” he added in the post.
Why It Matters: Kiyosaki’s comments come amid a broader debate about the role of institutional investors in the cryptocurrency market. His criticisms of Black Rock and Larry Fink reflect concerns about potential market manipulation and the concentration of power in the hands of a few large players.
Despite these concerns, Kiyosaki’s bullish prediction for Bitcoin suggests he remains confident in the cryptocurrency’s long-term potential.
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His comments highlight the ongoing tension between the decentralized ethos of cryptocurrencies and the increasing involvement of traditional financial institutions.
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Kiyosaki on Bitcoin $100,000: ‘Almost Impossible for the Poor and Middle Class to Catch Up’
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NBA legend Scottie Pippen needs no introduction to the world of Basketball. The former Chicago Bulls star hung his jersey on the exit door of the NBA back in 2004 after an illustrious 17-year-long basketball career that boasts about one of the best on-court performances of his life. Post Basketball, Scottie Pippen has shown interest in Bitcoin and has openly spoken about the benefits of owning the particular digital currency.
Scottie Pippen Gives NBA Stars Kobe Bryant and Wilt Chamberlain’s Reference In A Recent Bitcoin Promo
When it comes to talking about Crypto, Olympic gold medalist Scottie Pippen leaves no chance. The 59-year-old professional basketball star Pippen diverted the attention of the netizens after he went on to talk about NBA icons Kobe Bryant and Hall Of Famer Wilt Chamberlain in his recent promo with respect to Cryptocurrency. Scottie Pippen posted a sleeping image of himself on X and captioned it as “Just took a nap and Satoshi whispered ‘Bitcoin will go closer to Black Mamba numbers before it goes back to Chamberlain,’”
However, it is still unclear what numbers Pippen was talking about in his post. Wilt Chamberlain holds the record of single-game scoring as back in 1962, he had secured a century under his name. This particular achievement of the seven-time NBA champion is still one of the biggest records of all time. No basketball athlete has surpassed him as of now. Bryant holds the record for scoring 81 points in 2006 against the Raptors and created a storm in the NBA world. From Pippen’s reference, it could be understood that maybe he is indicating towards the Bitcoin value in the near future.
Scottie Pippen Makes Big Claims About Bitcoin
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One of the biggest supporters of Cryptocurrency, Scottie Pippen spoke about meeting the anonymous developer of Bitcoin, Satoshi in his dream. He even revealed that the Crypto whale had claimed that the value of Bitcoin would be at $84,650 in November 2024. The Chicago Bulls alum’s dream came true as the value of Bitcoin skyrocketed to $90,000 per coin after Donald Trump came into power in 2024. During an appearance on Money Making by the famous media outlet Fox Business, Pippen was asked if he bought Bitcoins after his dream, he said- “No, I didn’t. I didn’t buy any more. But I felt like I had made a pretty good prediction.” While talking about his dream, Pippen further added- “[Satoshi] didn’t explain it to me then [in 1993.] If so, I would have been a lot farther ahead of the game. And like most people, I sort of got out of the gate late. I started really learning about Bitcoin last year. I think it was around $33,000 or so per coin. And so I really started to study the whole world and to try and get a little bit more educated about it,” Bitcoin came back to the spotlight as soon as Donald Trump was re-elected for the second term as the US President. The popular cryptocurrency not only came on the first page of the world map again but also a prominent fluctuation in its valuation brought back the good old days for the Bitcoin holders across the globe. Also Read : NBA Legend Stephen Curry Gives A Hint At His Esteemed Collaboration With The Lakers Star LeBron James
The Company Behind the World's Third-Largest Cryptocurrency Just Invested $775 Million in This Little Company Taking on YouTube and AWS | The Motley Fool
Shares of technology company Rumble(RUM -6.39%) are at 52-week highs as of this writing, having jumped roughly 300% in value since lows set back in January. And much of its leap is thanks to a massive $775 million investment from the investment arm of Tether Limited, the company behind the cryptocurrency stablecoin Tether(USDT -0.04%).
Tether is the third-largest cryptocurrency in the world by market capitalization. As of this writing, the market cap is almost $140 billion, which trails only Bitcoin and Ethereum. But Tether isn’t like these other two cryptocurrencies; it’s a stablecoin.
A stablecoin intends to have a 1-to-1 price correlation with something else. For example, a U.S. dollar stablecoin should always be worth $1. It’s for people who want to explore the world of cryptocurrency without the volatility. Simply explained, they deposit $1 and Tether issues one new stablecoin worth $1.
According to Tether, it had about $125 billion in reserves as of Sept. 30 (its market cap was $119 billion at the time). Most of these reserves are in U.S. Treasury bills. It needs to hold these reserves in case people want to redeem their stablecoins for dollars. But Tether is able to make money for itself with these massive reserves in the meantime.
Tether CEO Paolo Ardoino recently said it’s on pace to earn $10 billion in net profit in 2024, which is an astounding amount for any company, let alone a cryptocurrency company. And the company doesn’t simply rake in these profits, but rather it invests its money from time to time, which is what it’s doing with Rumble.
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Why the market is excited about Tether’s investment in Rumble
Rumble turned heads when it went public in 2022 because this little company has big ambitions. The company intends to build internet infrastructure that’s free from censorship and it hopes to compete with Alphabet‘s video streaming platform, YouTube; Amazon‘s cloud computing service, AWS; social media platforms; and more.
The problem is that Rumble can’t simply wish all of this into existence — it takes money. And when ambitions are this high, it costs a lot of money to build. Unsurprisingly, the company had a net loss of $116 million in 2023 and has already lost another $102 million in the first three quarters of 2024.
But give Rumble some credit. The chart below shows its outstanding share count with the orange line. Ignore the brief spike shortly after it went public (the accounting of these things can get temporarily distorted upon going public). The chart shows that, to date, management hasn’t been raising money by diluting shareholders with stock offerings. It also hasn’t been taking on debt.
RUM Total Long Term Debt (Quarterly) data by YCharts
To the contrary, Rumble has been funding its growth with cash on hand. And I believe that’s the right move. After all, the company got its cash from its shareholders in the first place. These shareholders expect it to achieve its long-term vision by actually using this cash.
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However, Rumble is still burning cash at a fast pace and investors were getting worried about liquidity. The stock consequently skyrocketed when Tether announced its massive investment because the fears regarding liquidity were alleviated.
There are reasons for optimism with Rumble. In the third quarter of 2024, the company had 67 million monthly active users — that’s nothing to sneeze at. Granted, that’s down from its user base of 71 million in the third quarter of 2022. But it’s a large, engaged user base nonetheless.
The challenge has been growing revenue by getting advertisers to buy into Rumble’s potential. As CEO Chris Pavlovski lamented on the Q3 earnings call, “How much longer can brand advertisers ignore more than half the country?”
Rumble does have a premium subscription service that makes up for lack of interest from advertisers. But ad revenue is still important to the company and Pavlovski’s question is an admission that this is an ongoing headwind for the business. And, unfortunately, it’s impossible to know how much longer it will be before advertising demand picks up.
The good news for Rumble’s shareholders is that however long it is, it now has a longer runway than it had before thanks to the infusion of cash from Tether. While there are still a lot of moving pieces here and more details with the transaction that are worth knowing, the main takeaway is that Rumble has more time than it had before. And when it comes to investing, more time is almost always a good thing.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jon Quast has positions in Ethereum. The Motley Fool has positions in and recommends Alphabet, Amazon, Bitcoin, and Ethereum. The Motley Fool has a disclosure policy.
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