The Crypto Industry Goes To Washington And Comes Of Age

Cryptocurrencies, along with the regulatory vacuum they’ve created, have been on the radar of policymakers and tax authorities for years. The $1 trillion bipartisan Infrastructure Bill has brought crypto tax reporting back into focus. Legislators added new reporting requirements for crypto brokers to help pay for the Infrastructure Bill. The stricter tax rules on crypto transactions are forecast to generate about $28 billion in revenue that would go towards infrastructure development. The crypto industry, however, isn’t happy - the reporting requirements appear hastily written and not well thought through. Section 80603 of the Infrastructure Bill has a broad definition of a ‘broker’ that encompasses not just brokers but also non-broker individuals and entities such as miners, validators, nodes, and non-custodial software developers. The provision brings under the financial reporting requirements a swath of stakeholders, rather than just centralized custodial exchanges, who don’t have access to the reportable information in the first place. First is the broker reporting provision, which would require brokers (as expanded by the bill) to report transactions of their customers on a form similar to 1099-B. Second is expanding current law cash reporting on form 8300 to digital assets - this is potentially broader than, and duplicative of, the broker reporting. The IRS already requires taxpayers to disclose their crypto gains and losses in the Form 1040. The global industry has been anticipating stricter regulations not just in the U. S. but around the world. The crytpo industry is not against the taxes on cryptocurrency transactions and is broadly supportive of progressive policy but cannot support the way policymakers define a ‘broker’ in this instance – it is ambiguous and unworkable at the point of practical implementation. Following crypto industry objections, seeing the provision as anti-technology and anti-innovation, an amendment was put forward to clarify the definition by Senators Pat Toomey (R-Pa.), Cynthia Lummis (R-Wy.), and Ron Wyden (D-Ore.). Though the amendment wasn’t perfect, it received praise from the crypto community. Senators Mark Warner (D-Va.), Kyrsten Sinema (D-Ariz.), and Rob Portman (R-Ohio.), who also drafted the original provision, proposed an alternative amendment, which received support from the White House and Treasury Secretary Janet Yellen. In this amendment, the broker definition remained broad and could still potentially include entities like decentralized protocol software developers. Senator Ted Cruz proposed striking all crypto language from the bill. As ‘no more than five’ senators could answer ‘what the hell a cryptocurrency even is,’ he said, ‘the barest exercise of prudence would say we shouldn’t regulate something we don’t yet understand, we should actually take the time to try to understand it.’In the end, the two camps proposed a compromise amendment to clarify the definition.


All data is taken from the source: http://forbes.com
Article Link: https://www.forbes.com/sites/lawrencewintermeyer/2021/08/19/the-crypto-industry-goes-to-washington-and-comes-of-age/


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