US President Joe Biden has said he does not want to sign a debt limit deal that would benefit crypto traders.
During the final day of G7 talks in Japan, Biden addressed the budget talks, saying the terms offered by Republican leaders were “unacceptable.”
“I will not accept a deal that protects wealth tax cheats and crypto traders while jeopardizing food assistance for nearly 1 million Americans.”
A purported defense for crypto traders is tax loss harvesting, a tax planning strategy that involves selling cryptocurrencies that have declined in value to offset capital gains taxes on other investments.
Capital losses that result from the sale of these cryptocurrencies can be used to offset capital gains or even reduce ordinary income taxes up to $3,000 per year.
Essentially, an investor takes advantage of a downtrend in the crypto market to strategically sell assets at a loss, reducing the amount of taxes they have to pay.
According to a recent report According to the Washington Post, the White House and Republican leaders are in discussions to block the cryptocurrency transaction mechanism.
“White House proposals to close the cryptocurrency-related tax loophole and the real estate loophole were previously floated by the administration,” the report said.
“The cryptocurrency proposal would ensure that investors would not be able to claim losses on an asset that they then quickly bought back — a rule that already exists for stocks and other assets.”
Republicans say the rising debt is a spending problem
Meanwhile, Republican leaders rejected a proposal to end tax loss harvesting for cryptocurrencies or real estate.
Back in March, Speaker of the House of Representatives Kevin McCarthy stated that the rising U.S. debt is a “spending problem, not a revenue problem,” citing the Biden administration’s excessive spending during the pandemic.
“President Joe Biden’s budget is a reckless proposal that doubles down on the same far-left spending policies that led to record inflation and our current debt crisis.”
Republicans are proposing to solve the deficit by cutting $4.8 trillion in spending, which would affect the budgets of federal agencies.
The US faces a potential debt default as President Joe Biden and Republicans in Congress continue to clash over raising the $31.4 trillion borrowing limit.
Treasury Secretary Janet Yellen warned , that the Treasury could run out of room to stay under the debt limit as early as June 1 unless Congress takes action.
It is noteworthy that the issuer of Circle stablecoins rebalanced its Treasury holdings amid growing concerns about a possible US debt default.
The company, the issuer of the second-largest stablecoin in circulation, has chosen a reserve mix that favors short-term US Treasuries. The move comes amid a heated debate among financial experts over the US debt ceiling.