Today the United States House of Representatives is expected to vote on the bipartisan Infrastructure and Jobs Investment Act of 2021, a bill that authorizes extensive investments in areas such as passenger rail , bridge repair, clean water and sewage facilities, clean energy transmission, and universal high-speed internet access. In addition to that, hidden in the huge bill are several provisions that would directly affect millions of cryptocurrency users if enacted, in particular the expansion of tax information requirements for entities that handle transactions of cryptocurrencies.
However, it is not justified for the bill to become law, or even for the Chamber to vote on it on September 30 . The legislation is being processed in Congress along with the budget resolution bill, and various factions of the Democratic party (which controls most of the House seats but needs a clean party line for the initiative) condition their support for the Infrastructure bill to include certain provisions related to social policy in budget reconciliation.
As political maneuvering nears boiling point, this is what legal experts and crypto industry players think about the bill that may become law in the next few hours.
The spirit of the law
In this point, if the Investment in Infrastructure and Employment Law 2021’s in its current form will become law is anyone’s guess. Regardless of that, the way cryptocurrency-related provisions have found their way into an omnibus bill like this one could provide insight into how Congress might legislate on key policies affecting the crypto space going forward. .
A point of controversy is that the provisions that affect users and cryptocurrency companies were included in the bill without taking into account the opinion of the industry on the matter.
Ben Weiss, CEO of ATM provider CoinFlip, pointed out to Cointelegraph:
“Industry representatives did not have the opportunity to comment or discuss the policy changes, which will cause a major disruption to the cryptocurrency ecosystem. We believe that there should be more dialogue between Congress and members of this fast-growing industry to lead to a better and clearer policy that benefits everyone. “
At the same time, Jahon Jamali, co-founder of cryptocurrency investment firm Sarson Funds, does not believe that the passage of the bill will negatively affect the digital assets space in the long term, because the pace of the industry far exceeds the government’s ability to catch up. Jamali added:
“I am sure that the enormity of the size of the bill and the amount of dollars that the government intends to spend will have implications for finance as a whole and will most likely drive further innovation in the fintech industry to lay the foundation for a blockchain-based system. “
Brock Pierce, president of the Bitcoin Fou ndation, expects the market to “respond over time by adjusting to the reality of greater regulation.” Pierce expects cryptocurrency companies and entrepreneurs to collaborate with regulators for more sensible regulation as the sector’s political influence strengthens.
Indeed , the requirements set out in the bill won’t go into effect until after 2023, a very long time by the standards of the cryptocurrency universe.
Shaun Hunley, tax consultant for the software company Thomson Reuters Tax and Accounting, believes that although the bill is not approved today, some type of legislation will be enacted requiring the presentation of information on cryptocurrencies “due to the interest of the government. in fighting against tax evasion. “
Many of these agents do not interact They work with the parties that carry out transactions on the blockchain and, therefore, may not have access to your personal data, which would make compliance impossible.
Who are the brokers?
The crypto community’s biggest concern regarding the proposed legislation is the section of the Tax Code that expands the definition of a cryptocurrency “broker” (invoking the corresponding disclosure requirements) beyond cryptocurrency exchange platforms to include entities such as software developers, stakers, node validators, and miners.
Many of these actors do not interact with the parties that carry out transactions in the blockchain and, therefore, could not have access to your personal data, which would compliance impossible.
Stan Sater, Law Firm Business & Technology Attorney Founders Legal, believes that the confusing broadening of the definition of key is the result of a lack of understanding by lawmakers on how to deal with cryptocurrency disclosures. Sater commented to Cointelgraph:
“Usually, instead of relying on self-declaration, the government delegates to the intermediaries gathering the information you need for taxes. In financial markets, these intermediaries are brokers. So the definition of “broker” needs to be broadened, but how do you do it for digital assets and engage everyone in the industry? The government doesn’t really know how to tackle this, but they have a problem, so they came up with an incredibly broad definition of ‘broker’ that captures almost everyone involved in the digital finance industry, including individuals. “
In Sater’s opinion, the proposed requirements are “incredibly vague” and could lead to “forced surveillance of all”.
However, even if the bill passes in its current form, the language of the bill would not automatically become law, he said Olya Veramchuk, Director of Tax Solutions at Blockchain Software and Data Firm Lukka. Veramchuk said:
“The Treasury would have to issue a proposed regulation and request public opinion on the matter. That would be the time for industry participants to add their footprints to the regulatory landscape and educate regulators on the complexities of the digital asset space, hopefully leading to a viable and more feasible tax law. ”
More vigilance and declarations
Another piece of proposed legislation that has some in crypto circles irritated is section 6050I of the Tax Code which, according to cryptocurrency advocacy group Proof of Stake Alliance could make “receiving digital assets a crime if not is correctly declared. “ The provision applies to anyone who receives more than USD 10,000 and requires them to supply the sender’s personal information to the government.
Hunley, de Thomson Reuters Tax and Accounting, believes that although the requirement is not new in itself, it could curb the appetite of some companies to accept cryptocurrencies. Hunley commented:
“Amendment 6050I would only treat digital assets as cash for purposes currency transaction reporting. Only serious investors would use cryptocurrencies to transact over $ 10,000, and those are the types of transactions the IRS wants to know about. However, I think this new requirement could deter companies from accepting cryptocurrencies. as a form of payment. “
Lukka’s Veramchuk also noted that the rules articulated in section 6050I are not new, and therefore it is “unreasonable to view them as imposing undue surveillance on those involved in digital asset transactions.” The caveat, he added, is that these standards should only be applied in a practical, sensible and achievable way in the decentralized ecosystem of digital assets.
Hunley concluded that the bill “could potentially be confusing for taxpayers.” Added:
“The government would essentially treat cryptocurrencies as property for a purpose (statement of taxable income), cash for another purpose (the reporting rules of Section 6050I), and securities for another purpose (the brokers reporting rules). “
A good fiscal policy, in his opinion, is that cryptocurrencies are treated as a single thing for all intents and purposes.
As of 2 PM ET on September 30, it is still unclear if the 2021 Investment in Infrastructure and Jobs Act will be brought to plenary today.
Keep reading:
- Law Decoded: FUD for China and false dichotomies, September 20-27
- Cryptocurrency taxes have “the highest prior enforceability “, recalls the IRS commissioner
- The US CFTC fines Kraken USD 1.25 million for an alleged illegal offer
- The cryptocurrency language in the infrastructure bill is a political game, according to Cointelegraph’s general counsel
- Coinbase CEO Brian Armstrong says the proposed rule of cryptocurrency taxes doesn’t make sense
- According to Bitpanda executive, the events and n China have meant a roller coaster for the crypto world
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