The Crypto-Capital of the World: Experts Weigh In on USD1, Tax-Free Crypto

During his political campaign against Kamala Harris, Donald Trump placed plenty of emphasis on cryptocurrency, even vowing to make America “the crypto capital of the planet.”

Since the start of his presidency, Trump has been taking active steps to bolster the crypto industry and place the topic of cryptocurrency into worldwide headlines

Last week, it was announced that World Liberty Financial, the cryptocurrency founded by Trump and his sons, will be launching a new stablecoin, which is backed by U.S. Treasuries

A social media post announced that the new stablecoin will be known as USD1, but it’s unknown when the new coin will go on sale

In December, the politician set up a new advisory body, the Department of Government Efficiency (DOGE), which derives its name from the viral meme coin and appointed Elon Musk to a key position of power. In January, both Donald and Melania Trump launched their own meme coins, which initially skyrocketed in value

However, one of the most pressing questions has been whether Donald Trump will make crypto tax-free in 2025. Rumours about the prospect have been circulating on X over the past few days, with many users pressuring the president to impose a 0% tax on crypto earnings

In the week that Trump won the presidential election, online searches for “Crypto tax” increased by almost 200%. Since then, searches for the topic have been rapidly rising, particularly over the past few days

Due to rumours that Trump will make crypto tax-free, experts at the cryptocurrency tax software site CoinLedger have offered some advice on whether the presidency is likely to declare a 0% tax on crypto profits

What is a stablecoin?

Stablecoins are a popular type of cryptocurrency that are designed to maintain a stable value, often equivalent to $1. In a post uploaded to X by World Liberty Financial, Trump’s latest USD1 stablecoin was advertised alongside the following statement: “No games. No gimmicks. Just real stability.”

Stablecoins are designed to protect crypto traders from the usual price fluctuations associated with the crypto market, which simplifies transactions and mitigates the risk of financial loss. During a recent crypto conference, Trump announced that stablecoins will “expand the dominance of the U.S. dollar.”

The launch of USD1 has caused online searches for “Stablecoin” to increase by 100%, reaching their highest peak in the past 90 days

Trump’s launch of USD1 has reaffirmed the president’s emphasis on the crypto market, but the move has been criticized by some as a conflict of interest. This is because the Trump family will be the primary beneficiaries of the new stablecoin, even though it may encourage new traders to invest in cryptocurrency

The launch of USD1 by World Liberty Financial raises further concerns about the stability of Trump’s reforms to the crypto industry and indicates that a 0% crypto tax may be closer than previously expected

Is the 0% crypto tax likely?

As it currently stands, it’s legally required for people to declare any crypto financial gains or losses on tax returns. Crypto is subject to standard short-term (10-37%) and long-term (0-20%) capital gains tax rates. Failure to report any earnings through cryptocurrency can result in serious consequences, such as fines and prison sentences depending on the severity of the case

By exempting crypto earnings from the standard tax rates, this would hopefully incentivise more people to get involved in crypto trading, ultimately boosting the industry. Due to the market’s current decline, proposing a 0% tax would be the perfect opportunity for Trump to revive it

It’s speculated that the 0% tax would only apply to American cryptocurrencies, which means that non-US-based coins would be subject to higher taxes

There would be plenty of incentives for Trump to introduce the 0% tax in 2025, particularly due to the market’s current decline and the possibility of winning favor and support within the crypto community. This is why the rumors seem so plausible

It’s also important to note that Trump has appointed Elon Musk, one of crypto’s biggest advocates, to a powerful political role in the president’s government. Because of this, it’s not out of the question that Musk may be pressuring Trump to introduce the 0% tax, making tax-free crypto earnings a real possibility

However, while the 0% tax would benefit the market initially, it would make the industry even more vulnerable to severe fluctuations. The possibility of implementing higher taxes on non-US-based coins means that investors will be more likely to pull their holdings, which could trigger a significant market downturn

A 0% tax on crypto investments has not yet been formally proposed in Congress, but it still remains a likely possibility for the president

What is the current reaction at the prospect of crypto becoming tax-free?

Some users on X are excited at the possibility of the 0% tax, while others are rightfully remaining skeptical

Certain users are questioning how the 0% tax will affect those who fail to make a profit, while others are complaining that financial gains would be unrealistic in the market’s current downturn

It’s important to note that the 0% tax would have a serious knock-on effect for the crypto market on a global scale, as American investors will be cut off from global crypto trading

Introducing tax-free earnings solely on American coins would then create a surge in individuals creating their own American-based crypto coins, which will only aggravate the market’s pre-existing instability

The 0% tax will likely create a surge in scams and illegitimate tokens, making the market even more vulnerable and deterring potential investors

While the 0% tax may initially seem positive, it would end up causing more problems than it would solve

Which cryptocurrencies would the 0% tax impact?

The prospect of crypto becoming tax-free has raised a lot of questions among traders and investors, with one main question being which cryptocurrencies the 0% tax would apply to

If implemented, it’s likely that the tax will target American cryptocurrencies in order to incentivise more people to get involved in crypto trading

However, it’s not yet clear whether the 0% tax would apply solely to either long-term or short-term capital gains

As Bitcoin and Ethereum are not tied to any specific country, it’s currently unknown how they would be impacted by the prospective 0% tax

David Kemmerer, the Co-Founder and CEO of CoinLedger, commented:

“While the prospect of a 0% tax on crypto earnings may initially seem positive, it’s important to note that this decision could likely place the market in even further danger

“It’s likely that Trump is experiencing pressure, both from the crypto community and Elon Musk, to implement the 0% tax, which makes it such a likely possibility in 2025

“However, it’s important to emphasise that removing standard tax rates from crypto investments will be a source of financial turmoil, particularly for the global crypto market

“If the 0% tax is implemented, it will likely only apply to American-owned coins, while non-US-based cryptocurrency will be met with a hefty 30% tax increase

“Ultimately, the prospect of tax-free crypto earnings is a likely, yet concerning, possibility in 2025.”

This information was provided by experts at CoinLedger, the crypto tax site.