An article to understand the ins and outs of the U.S. cryptocurrency tax amendment

Recently, the entire cryptocurrency industry is paying close attention to the U.S. Congress’s Infrastructure Act and its cryptocurrency tax amendments.

How does an infrastructure bill have anything to do with cryptocurrency? Follow the Golden Finance to ask to understand the ins and outs.

What is the Infrastructure Act?

This bill originally came from the “Investing in a New Vision for the Environment and Surface Transportation in America Act or INVEST in America Act” submitted by Congressman Peter A. DeFazio on June 4, 2021. Vision or Investment in the United States Act (HR3684, after the bill is submitted to Parliament, numbers beginning with HR are allocated).

The bill is a $715 billion infrastructure package that includes provisions related to federal assistance highways, transportation, road safety, automobile transportation, research, hazardous materials, and the Department of Transportation’s rail program.

On July 30, 2021, the Senate voted to formally accept HR3684 as a legislative project for a possible cross-party infrastructure package, led by Senator Warner-Sinema-Portman. After negotiations between the two parties, the bill reached 1 trillion yuan. Dollar.

Because the bill is discussed in the Transportation and Infrastructure Committee of the House of Representatives, and its main content is related to infrastructure, it is generally called an infrastructure bill.

Where does the money come from? Targeting cryptocurrency

After bipartisan negotiations in the United States, the size of the infrastructure bill bill reached $1 trillion. The wish is beautiful, the reality is cruel. Where does this $1 trillion come from is a question.

US Treasury Secretary Janet Yellen has repeatedly “implied” Congress to raise the US debt ceiling at the Senate Appropriations Committee hearings, otherwise the US may default on debt as early as August. Unless the money printing machine is turned on again, but then American inflation can’t stand it.

Therefore, U.S. legislators have set their sights on cryptocurrencies and plan to tax cryptocurrencies in the infrastructure package, raising about 28 billion U.S. dollars. A new clause has been added to the Infrastructure Act to expand the definition of “broker” in the tax law to include “anyone (for compensation) who is responsible for and regularly provides any digital asset transfer service” as a “broker”.

The bill shows that the new infrastructure bill plans to adopt a new information reporting system for crypto exchanges and other related parties (wallet developers, hardware wallet manufacturers, multi-signature service providers, liquidity providers, and possibly miners, etc.). Any broker that transfers digital assets needs to submit a report according to the revised information reporting system, so that individuals or institutions interacting with cryptocurrencies may have to start reporting their transactions.

The definition of “broker” is very broad. Literally, it can be applied to every participant in the U.S. encryption industry, including PoW miners, PoS validators, DeFi participants (DEX LP, liquidators, protocol managers, etc.), node operators, wallet developers, etc. Inside. If the infrastructure bill is passed, the possible result is to stifle the cryptocurrency industry.

Therefore, practitioners in the U.S. cryptocurrency industry vowed to oppose the bill, and even some lawmakers opposed the bill.

U.S. cryptocurrency industry rallies against it

Jake Chervinsky, general counsel of the DeFi loan agreement Compound, commented on Twitter: “For non-custodians such as miners, it is impossible for them to obtain the information required to fill out the 1099 form. In fact, this may mean the United States. (In fact) mining is banned. It is illogical to adopt a regulation that is simply impossible to comply with, unless the goal is to kill the entire industry.”

Twitter CEO Jack Dorsey tweeted that imposing the cryptocurrency tax provisions of the Infrastructure Act on developers, mining and node vendors will only promote the development of these technologies abroad, and the definition of crypto brokers should be simplified as a fiat-to-cryptocurrency exchange.

The NGO Electronic Frontier Foundation (EFF) criticized the new US infrastructure bill. The current draft will turn the encryption industry into a “cumbersome monitoring system”, which will complicate the legal environment for encryption projects.

Coinbase CEO Brian Armstrong said that there are several key moments that determine the future of encryption. One is the infrastructure bill of the Senate. Mark Warner and others subsequently proposed amendments to determine which basic technologies can or cannot be used in encryption. In this regard, Musk replied and agreed that now is not the time to choose technical winners or losers in cryptocurrency technology, and there is no crisis to force hasty legislation. 

Coinbase CEO Brian Armstrong said that the new infrastructure bill proposed by the U.S. Senate and related to crypto assets may have a serious negative impact on the U.S. cryptocurrency industry and push more innovations overseas.

Tesla founder Musk also said, “There is no need to choose the winners and losers of technology at this moment (by the government)”, and there is no crisis to force hasty legislation.

Congressman Warren Davidson stated that the additional compliance costs that the bill may cause will severely endanger the viability of companies and startups in the Bitcoin sector. He lamented that it must have been written by someone who knew nothing about the industry and would make the United States miss one of the most revolutionary technological advances in history and lag behind its opponents in this important innovation.

Amendment, Bipartisan Compromise

Because of the numerous opposition from the industry and the understanding of cryptocurrencies, on August 5th, US Senate Finance Committee Chairman Ron Wyden and Senators Pat Toomey and Cynthia Lummis submitted amendments to the cryptocurrency tax provisions of the Infrastructure Act. The amendment proposes to exclude miners and software developers from the definition of crypto “broker” so that crypto companies, including miners and software developers, are excluded from the tax reporting provisions of the bipartisan infrastructure bill.

U.S. Senators Mark Warner and Rob Portman, who previously wrote the cryptocurrency tax rules of the Infrastructure Act, also proposed amendments again on August 6. The scope of the cryptocurrency tax rules only excludes proof-of-work (PoW) mining on the previous basis. , Software and hardware wallet sellers.

On the evening of August 8th, local time, the U.S. Senate finally closed the debate on the Warner-Sinema-Portman Infrastructure Bill amendment with 68 votes in favor and 29 votes against. After the debate, the senators announced that they had reached a compromise on the digital asset reporting requirements in the Infrastructure Act. The “brokers” exclude software developers, transaction verifiers, and node operators. The tax reporting requirements “should only apply to intermediaries.” “. And formally submitted to the Senate for deliberation.

All amendments need to be passed by the Senate without objection before they can be regarded as amendments and become part of the infrastructure bill. If formally reviewed and no senators object, the agreed amendments will be included in the infrastructure bill.

Sudden Change

As a result, the situation suddenly changed during the formal voting. Senator Shelby, the Republican of Alabama, suddenly broke out and proposed a new amendment requesting an increase of $50 billion in defense spending in the infrastructure bill.

The bill was opposed by another senator Bernie Sanders, so Richard Shelby expressed his opposition to all proposals, including the cryptocurrency tax amendment that has been agreed between the two groups of lawmakers.

Therefore, the two-party compromised cryptocurrency tax amendment cannot be included in the infrastructure bill before it is formally submitted to the Senate for deliberation.

It is expected that the Warner-Sinema-Portman infrastructure bill with the strictest definition of “broker” will be voted on in the Senate on Tuesday morning, US time.

However, according to the US legislative process (Introduced, Passed House & Passed Senate, To President, Became Law), even if the infrastructure bill is passed in the Senate, it still has to be reviewed and passed by the House of Representatives, and there is room for amendment.

The amendments surrounding the taxation of cryptocurrencies will continue to fight and compromise.

 

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/an-article-to-understand-the-ins-and-outs-of-the-u-s-cryptocurrency-tax-amendment/
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