Congress is expected to pass a $550 billion infrastructure bill that threatens to ‘kill’ the cryptocurrency industry.

 67 Interactions,  2 Today

The Senate is debating the infrastructure bill. It’s unclear whether a crypto-related provision will be included in the final bill.

In suburban Minnesota, a bridge collapses, contaminated pipes make drinking water unsafe in urban Michigan, and the internet goes down in rural Kansas. The Senate is currently working on a $550 billion bipartisan infrastructure bill to address such issues.

However, the cost for those involved in cryptocurrency may be high, with some claiming that it will “kill” the industry as we know it.

To cover the remaining $28 billion, the bill includes a provision that broadens the definition of a broker for tax purposes to include “any person who (for consideration) is responsible for and regularly provides and services effectuating transfers of digital assets.”

In practise, this means that crypto miners, validators on proof-of-stake networks, and possibly even those involved in decentralised finance markets (such as liquidators or governance-token holders) will be required to comply with IRS reporting requirements and file 1099 forms. Customer information such as name, address, and tax identification number are included on these forms (which, in the case of self-employed individuals, can be a social security number).

The provision’s ostensible purpose is to ensure that people pay taxes on their cryptocurrency earnings—legislators estimate that it could result in an additional $28 billion in payments—but it does so by increasing financial surveillance.

See also  Mayoral candidate promises to make New York Metropolis the "most cryptocurrency-friendly city in the country."

This may resemble the Trump administration’s proposed (and delayed) crypto wallet regulations, which would “require banks and money service businesses (‘MSBs’) to submit reports, keep records, and verify the identity of customers” for crypto transactions to private wallets. However, it is possible that it will be even worse.

Jake Chervinsky, general counsel at DeFi lending protocol Compound, tweeted, “It’s literally impossible for non-custodial actors like miners to get the information they need to do Form 1099s. In practice, this could mean a de facto ban on mining in the USA.”

Marta Belcher, a cryptocurrency and civil liberties attorney, told Decrypt, “The bill could make it impossible to conduct cryptocurrency transactions directly with others, via open-source code (e.g. smart contracts and decentralized exchanges), while remaining anonymous.”

Chervinsky added: “It defies logic to adopt a regulation for which compliance is literally impossible, unless the goal is to kill the industry.”

According to sources with knowledge of the bill negotiations, Decrypt Chervinsky’s assessment of the situation is accurate. However, it is unclear whether this provision will be included in the final bill, which is expected to pass. “While the bill’s language is rapidly evolving, as written, the definition is broad enough to potentially include miners and others in the crypto space,” Belcher said.

See also  How Yellen's installation is reviving abandoned crypto monitoring rule

For some, the process’s obscurity is a source of frustration.

Evan Greer, director of the digital rights group Fight for the Future, told Decrypt, “It seems like a sneaky backdoor method of enacting the recently delayed FATF guidance without real democratic process.” She was referring to the Financial Action Task Force’s draft guidance to virtual asset service providers, which would mandate that even non-custodial entities collect data about others’ crypto use and report it to the federal government.

“Policy changes affecting civil liberties, privacy, and the future of the internet should be debated openly, not tacked onto must-pass infrastructure legislation at the last minute,” she added.

Today’s procedural vote was 66-28 in favour of the infrastructure bill. Senators are still revising the proposed legislation, which could be put up for a final vote next week before Congress adjourns on August 9.


Subscribe to our newsletter


Leave a Reply

Your email address will not be published. Required fields are marked *