For some time now, Donald Trump has been trying to position himself as a key figure in the cryptocurrency industry.
With the latest launch of his TRUMP coin, he became the first president to bring political influence to the coin market. However, this decision raises several legal and tax challenges.
TRUMP Coin Raises Major Tax and Legal Questions
According to FinTax, a web3 financial management company, one of the biggest concerns surrounding TRUMP is whether the coin could be classified as a security.
“First, there is the question of whether this meme coin is a security. This is extremely important for its legality,” FinTax said.
Cryptocurrencies issued through Initial Coin Offerings (ICOs) are generally treated as securities. Yet the TRUMP team made it clear that the piece did not constitute security. TRUMP’s website showed that it does not promise any future profits.
This statement does not completely eliminate the possibility of an SEC investigation, however, as the regulatory position on meme coins remains unclear.
Another concern is the potential for loopholes when it comes to political donations. The Federal Election Commission (FEC) has strict rules governing political donations. Launching a meme coin could enable fundraising methods that bypass traditional regulations.
If TRUMP is used to raise political funds, it could raise red flags and even lead to legal challenges. While there is no concrete evidence linking the coin to political donations, the potential for controversy remains high.
Beyond the legal issues, FinTax said there was a tax issue surrounding the TRUMP launch. According to the IRS, cryptocurrency profits are taxable, and understanding how taxes apply to TRUMP could be complicated.
Trump’s team currently holds 80% of TRUMP’s total supply. They will unlock this in stages over the next three years.
The question is whether unlocking the coins will trigger a taxable event. Generally, capital gains tax is only triggered when assets are sold or exchanged.
However, authorities could consider crypto unlocking a taxable event, depending on how they handle it.
TRUMP Launch Fuels Tax Cut Speculation
At the same time, crypto experts are looking into possible tax cuts following the launch of TRUMP. According to CoinGecko, Trump is now the third largest coin with a market cap of $11.7 billion.
The crypto community is hoping that Donald Trump’s new crypto wealth can lead to tax reforms.
“Trump made around $20 billion from his token. That means another $5 billion in his pocket if he eliminates capital gains on crypto… The President of the United States now has a multi-billion dollar personal incentive to eliminate the capital gains tax cryptographic,” noted crypto trader Gammichan.
Meanwhile, Mike Alfred, a crypto investor, pointed to a similar possibility of Trump cutting income taxes on crypto sales.
“Now that 80% of Trump’s wealth is suddenly crypto, you can expect all federal income taxes on crypto sales to end within a year. This is how the game is played. Watch and learn (and buy Bitcoin for the kids).
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