Regulation

John Deaton Raises Key Questions on U.S. Crypto Projects and Tax Exemptions

Published

2 days ago

January 26, 2025

Coin2049 Newsletter

Pro-XRP lawyer John Deaton has raised critical questions regarding tax exemptions for U.S.-based cryptocurrency projects. His remarks focus on identifying which projects qualify for the proposed zero capital gains tax and the implications for companies with global affiliations.

Crypto Lawyer John Deaton Raises Concerns Over U.S. Tax Policies

In a recent tweet, John Deaton discussed the ambiguity surrounding U.S.-based cryptocurrency projects. He questioned whether projects with operations or foundations abroad, such as Solana and Tezos, would meet the requirements for tax exemptions.

Solana Labs, headquartered in San Francisco, operates under the Solana Foundation based in Switzerland, while Tezos was developed by U.S.-based Arthur and Kathleen Breitman but is governed by the Switzerland-based Tezos Foundation. Deaton’s inquiry centers on whether such hybrid structures qualify as U.S.-based entities under the proposed tax policies.

John Deaton also pointed to cryptocurrencies like XRP, XLM, HBAR, AVAX, and XCH, which may face fewer jurisdictional hurdles. These projects meet the criteria on the surface, potentially positioning them to benefit from the zero capital gains tax.

Moreover, Deaton emphasized the potential for tax incentives to drive broader adoption of cryptocurrencies as corporate treasury assets. He questioned whether companies adopting digital assets like XRP, XLM, and HBAR would gain a competitive edge under the proposed zero capital gains tax policy.

He also raised concerns about the treatment of foreign entities with U.S. operations, such as Hut 8, and their eligibility for tax benefits.

More so, recently the pro-XRP lawyer highlighted four key objectives for the White House Crypto Council. He urged its members to focus on critical areas like SAB 121, the establishment of a strategic Bitcoin reserve, crypto tax payments, and overarching crypto taxation policies.

U.S. Crypto Companies and Mining Firms Could Reap Benefits

John Deaton further explored how U.S.-based companies, including Ripple, Gemini, and ConsenSys, might benefit from the tax exemption if it applies to corporations. The tax breaks could incentivize these firms to expand their crypto holdings and encourage other companies to adopt cryptocurrency as a reserve asset.

Deaton also addressed the status of Bitcoin miners like Riot Platforms and Marathon Digital Holdings. These U.S.-based miners might qualify for the exemption, but questions remain about companies like Hut 8 Corp, a Canadian entity with expanding operations in the U.S. John Deaton highlighted the need for clarity on whether international companies with significant U.S. activities could also benefit.

Treasury Reserve Strategies and Corporate Crypto Adoption

Another key issue raised by Deaton involves corporations adopting cryptocurrencies like Bitcoin, XRP, and HBAR as part of their treasury reserves. He questioned whether such strategies would qualify these companies for tax benefits under the new policies.

Prominent firms like MicroStrategy, known for its Bitcoin holdings, could stand to gain from the tax exemption if their crypto reserve strategies align with the proposed framework. The policy might also encourage other companies to include crypto in their balance sheets.

More so, recently, Deaton also emphasized the broader challenges facing the cryptocurrency industry. He criticized past regulatory actions by the U.S. Securities and Exchange Commission (SEC), which he described as resource-draining and counterproductive.

John Deaton called for an end to what he referred to as “crypto wars,” urging a shift toward clearer regulations to support innovation.