Summary of the cryptocurrency part of the U.S. Infrastructure Act

The Biden administration is currently passing a one trillion dollar infrastructure bill, some of which involve the cryptocurrency industry. Jake Chervinsky, the chief counsel of Compound, made some summary and reminders on Twitter, and translated it briefly. The following is Chinese:

1/ This is the case with the US Infrastructure Act.

A new clause has been added to expand the definition of “broker” in the tax law  , covering almost everyone in cryptocurrency, including non-custodial such as miners, forcing them to do something to users KYC.

This is not a drill

2/ The Act expands the definition of “broker” to cover “anyone who is responsible (for remuneration) and regularly provides any digital asset transfer service.”

The previous draft stated “even non-custodial” and clearly included decentralized exchanges (DEX) and P2P markets.

3/ This definition is very broad. If understood literally, it can be applied to almost all economic participants in the US cryptocurrency industry.

This includes  PoW miners and PoS validators , because “providing services to achieve the transfer of digital assets for reward” seems to apply.

4 / It may also include a large number of DeFi market participants, such as  liquidity providers (DEX LPs), liquidator, protocol control people (governors) and so on .

According to the meaning of “for consideration”, it may also be extended to non-economic participants, such as node operators or wallet developers.

This range may be very large.

5/ Tax laws require brokers to comply with the reporting requirements of the Internal Revenue Service (IRS). Most importantly, they must provide the customer with Form 1099 and submit it to the IRS.

In order to fill out the 1099 form, the broker must collect customer data, including name, address, phone number, etc.

6/ This means that the broker must perform KYC (Know Your Customer) on the client to comply with IRS reporting requirements.

Therefore, the function of this clause is a surveillance mission, as Secretary Mnuchin proposed in the last few days of the Trump administration.

As before, this is a very bad idea.

7/ Those who know cryptocurrency already know that users are anonymous and access is permissionless.

It is almost impossible for non-custodians like miners to get the information they need to get the 1099 form.

In practice, this could mean a de facto ban on mining in the United States.

8/ This sounds crazy, but it can happen.

Most cryptocurrency legislation is silent, so it is easy to be overlooked. Not this time.

This provision is part of a bipartisan and other popular infrastructure bill, which is rapidly advancing in Congress and is highly likely to be passed.

9/ You may ask, what is the relationship between cryptocurrency and infrastructure?

The bill must include a “pay-for” clause to raise revenue for new expenditures in order to achieve a balance of payments as a whole. The definition of “broker” is one of the payment clauses in the bill drafted by the Senate.

10/ In such a bill, there are three main ways to increase revenue: increase existing taxes, increase new taxes, or improve tax compliance.

Allegedly, this falls into the third category, enabling people to pay the taxes they already owe. Congress believes that cryptocurrencies are full of tax evaders. (it’s not true.)

11/ The Infrastructure Act is estimated to cost more than US$1 trillion. Congress assessed that the new definition of “broker” could bring about $28 billion in new taxes.

I don’t know how they got this number, or how it is possible to calculate it.

In any case, it should not be used this way to get a new law.

12 This is a seriously misguided clause. If adopted, the harm to American interests will far outweigh the benefits.

Let me tell you my five reasons.

First, it is against logic to pass a rule that is practically impossible to comply, unless the purpose is to kill the industry.

13/ Second, this will be a huge foreign policy failure.

After China made the geopolitical mistake that forced miners to leave their country, many of us hope that the United States can gain market share in this critical area.

We cannot repeat the mistakes of China. We must stay in the game.

14/ Third, this doesn’t work. For every dollar of tax increase, we will lose two dollars (or ten dollars) because the U.S. cryptocurrency industry will close or move overseas.

As more and more users “secretly store” on unregulated platforms, the IRS will not only not figure out the cryptocurrency benefits that are taxable, but will only know less.

15/ Fourth, it broke our discussions with FinCEN.

Since President Biden took office, FinCEN has done a lot of solid work on cryptocurrency anti-money laundering supervision. We should maintain this process instead of sneaking into KYC through the back door of the tax law to cut it off.

16/ Fifth, the burden it will place on civil rights is unacceptable.

Our 4A privacy rights limit how much surveillance the government can perform without a search warrant, and in the post-SolarWinds era, the last thing we need to do is to change A lot of sensitive information is exposed to security vulnerabilities.

17/ So, what can we do?

First of all, don’t panic. This regulation is not final yet and may still be revised.

Even if it passes as it is, it will not take effect until 2023 at the earliest, so at least we have time to try to revoke it in Congress or in court. This may be a long struggle.

18/ If you are a US citizen, call your members of Congress, especially Senator Portman, if you are in Ohio.

After we resisted FinCEN and FATF, if someone said “It’s useless to do this”, I’m going crazy.

19/ If you are the leader of an American cryptocurrency company and have not yet participated in it, please contact me or the team at @BlockchainAssn (after calling your congressman). Your voice is especially important.

Finally, please donate to @coincenter. They may need it.

20/ As far as I am concerned, as usual, I will work with @BlockchainAssn, @fund_defi and others to file a lawsuit and challenge the clause if things get to this point.

I don’t think the courts would be happy to see a law that would force non-custodians (for the IRS) to monitor American citizens.

21/ Things are going very fast, which can be scary.

However, just like the previous FinCEN proposal, we were surprised to see the entire industry come together to oppose this this week. We do have some of the best and brightest people on our side.

Please stay tuned for updates.

 

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/summary-of-the-cryptocurrency-part-of-the-u-s-infrastructure-act/
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