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The just passed 1.2 trillion dollar spending bill passed by the U.S. House of Representatives left the crypto sector wondering—and worried—about the ramifications.
Most Democrats voted for the bill. All except 13 Republicans voted against it.
Why are crypto provisions even in an “infrastructure” bill?
Simply put, the regulations meant to track and tax crypto related activities were added to the legislation as a revenue raising scheme for the costly package.
There are multiple issues raised by the crypto provisions.
If it reaches final passage, the IRS and Treasury Department will be allowed to define tax reporting regulations for bitcoin transactions, starting in 2023.
A section in the act dubbed “Information Reporting for Brokers and Digital Assets” requires “brokers” to disclose every digital-asset transfer made to an account of an unknown person or address, according to the law.
The new standards will require Know Your Customer (KYC) and tax data reporting systems.
Many crypto projects are centered around privacy that will make reporting requirements of the bill a challenge.
Coinbase CEO Brian Armstrong tweeted his concern following the measure’s passage:
“This 6050I provision in the infrastructure bill seems like a disaster if I
understand it. Criminal felony statute that could freeze a lot of healthy crypto behavior (like Defi).”
“Our team is looking into this further to try and figure out what exactly the implications are.”
Coinbase is currently the only NASDAQ listed crypto exchange in the U.S..
The definition of a “digital-asset broker” is a particularly problematic component of the clause. It states that “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person” would be considered a broker.
Miners who earn crypto running network nodes and verifying transactions for Bitcoin and Ethereum appear to meet the legislation’s definition of “brokers.”
That’s a huge problem, and could be among the uncertainties that drive crypto activities out of the U.S..
Among many others expressing dismay about the bill’s crypto provisions was the Crypto Council for Innovation.
It said that software developers and miners could both be targeted by the provisions, which would be disastrous for the crypto innovation in the U.S..
The Council also criticised “undue financial surveillance” that the provisions appeared to require, and called on Congress to address the issues involved with more clarity.