President Biden’s spending bill includes new language regarding the regulation of crypto assets

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President Biden’s new agenda could expand how capital gains taxes apply to crypto assets.

Bill HR 5376, also known as the “Build Back Better” bill, contains a clause that would change the constructive selling rule to apply to cryptocurrencies and other digital assets.

The constructive selling rule was created in 1997 to prevent investors and hedge funds from taking advantage of a loophole in the law that allowed them to lock in investment gains without having to pay capital gains taxes, according to Investopedia.

Constructive sales are defined as short sales of the same or similar properties, followed by entering into forward contracts for the delivery of the same property.

Currently, under U.S. Code 1259, the constructive sell rule only applies to appreciated financial positions, which are defined as “any position in a stock, debt instrument, or partnership interest if there is. would have a gain if such a position were sold, ceded, or otherwise terminated at fair market value.

The bill would amend this clause by adding the words “digital assets” after “debt instruments,” meaning that crypto investors would no longer be able to circumvent capital gains tax by making constructive sales.

The new law would come into force upon adoption of the bill and would only apply to contracts signed after its enactment.

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