Early in August, a message came from a digital advocacy group, Fight for the Future, which urged individuals to contact their senators and express their opposition to one component of new cryptocurrency restrictions included in the big federal infrastructure bill. The Senate offices were inundated with calls. Jack Dorsey, the CEO of Twitter and Square, and Brian Brooks, a top banking executive, were among those who spoke out against the bill.
The bill titled H.R. 3684, or the “INVEST in America Act,” was first introduced in the House of Representatives on June 4th of this year. The bill is almost 2,000 pages long. According to congressional accountants, the bill may generate $28 billion in income over ten years.
One approach senators proposed paying for the $1 trillion infrastructure bill requires crypto brokers to report their customers’ purchases to the IRS, similar to how stockbrokers do. It might pave the path for greater cryptocurrency regulation, which the Biden administration is pursuing as it pushes for tax compliance.
Crypto Heavyweights Fight for Modification
Notably, the bill’s original language stated unequivocally that brokers, including any person, entity, decentralized exchanges, and peer-to-peer markets, must disclose cryptocurrency transactions worth more than $10,000 to the Internal Revenue Service (IRS). But many key industry figures fought this requirement.
The efforts of the Blockchain Association and other industry players appeared to have paid off after the bill was announced, as the language was changed to make it clear that only crypto market participants must declare tax.
According to an online copy of the draft bill, only individuals who conduct digital asset transfers will be categorized as brokers, according to an updated version of the bill. To put it another way, the word no longer expressly includes decentralized crypto exchanges, but it still comprises miners, node operators, software developers, and other such parties.
By the second week of August, The Senate passed the $1.2 trillion infrastructure bill without any of the suggested crypto tax reporting modifications that had been holding it up.
“We’re disappointed but not surprised,”
Neeraj Agrawal, Coin Center communications director, told The Verge.
“It was always a long shot. That said, we have opportunities over the coming months to get this fixed in legislation.”
How Bad Is This for Crypto?
The infrastructure bill’s contentious wording requires cryptocurrency “brokers” to submit customer information, including transactions, to the Internal Revenue Service. Certain crypto operators, like miners, stakers, and software developers who don’t have consumers, are concerned about their capacity to comply with this law.
Another issue raised by the passage of this bill is the Senate’s lack of understanding of cryptocurrencies. The Senate held a hearing on “Cryptocurrencies: What Are They Good For?” on the 3rd of August. Senators spent the majority of the hearing trying to grasp a fundamental concept of cryptography. The majority of Senators who voted in favor of the new bill were not even present at the hearing. The bill was passed on the Senate floor just over a week after the hearing.
The terminology used to describe a broker is far too broad. The majority of the revenue for this legislation will come from taxes levied on cryptocurrency users,
“currency you can’t hold in your hand would effectively pay for roads, bridges, water systems, internet broadband access, and shoring up the electrical grid.”
As previously stated, modifications to clarify the term “broker” were made, but they were promptly knocked down following their presentation with little thought. As the bill advances, there isn’t much anyone can do at this point.
However, there’s hope. The Treasury Department has stated that after the bill is passed, it will offer guidance on the standards of the rules, guaranteeing that companies who do not operate as brokers will be exempt.
The Treasury Department tried to reassure crypto supporters by assuring reporters that the term “broker” does not include miners or developers. Many crypto users think that the assurance is insufficient, and that future administration could broaden the bill’s underlying definition.