US President Joe Biden has said that he is not willing to sign a debt ceiling agreement that would benefit crypto traders.
During the final day of G7 talks in Japan, Biden addressed budget talks, claiming the terms proposed by Republican leaders were “unacceptable”.
“I am not going to agree to a deal that protects property tax fraud and crypto traders while risking food aid for nearly 1 million Americans.”
The perceived safety for crypto traders refers to tax-loss harvesting, a tax planning strategy that involves selling cryptocurrencies that experience a decline in value in order to offset capital gains taxes on other investments.
Capital losses from the sale of these cryptocurrencies can be used to set off capital gains or reduce ordinary income tax by up to $3,000 per year.
Essentially, the investor is taking advantage of the downtrend in the crypto market to strategically sell assets at a loss, reducing the amount of taxes owed.
according to recent reports According to The Washington Post, discussions are underway between the White House and Republican leaders about blocking mechanisms for cryptocurrency transactions.
“The White House has proposed closing a cryptocurrency-related tax loophole and a real estate loophole both introduced by the prior administration,” the report said.
“The crypto proposal would ensure that investors cannot claim losses on assets that they quickly repurchased – a rule that already exists for stocks and other assets.”
Republicans claim debt growth is a spending problem
Meanwhile, Republican leaders have rejected proposals to phase out tax-loss harvesting for crypto or real estate.
Back in March, House Speaker Kevin McCarthy Said US debt growth 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 to double down on the same far-left spending policies that led to record inflation and our current debt crisis.”
Republicans are proposing to address the deficit by enacting $4.8 trillion in spending cuts, which would hit the budgets of federal agencies.
America is facing potential loan defaultAs President Joe Biden and congressional Republicans hold on to raising the $31.4 trillion borrowing limit.
Treasury Secretary Janet Yellen has warning That means the Treasury risks running out of room to stay under the debt limit as early as June 1 if Congress fails to act.
Notably, stablecoin issuer Circle has rebalanced Its Treasury holdings amid growing concerns over a possible US debt default.
The issuer of the second largest stablecoin in circulation has opted for a mix of reserves that favors short-dated US Treasuries. The move comes amid heated debate among financial experts over the US debt ceiling.