The U.S. Infrastructure Act will bring a huge tax blow to the crypto industry: industry insiders say they will fully oppose it

In an unannounced bipartisan infrastructure plan, there is a full blow to cryptocurrency transactions, which may bring a lot of taxes to the U.S. government and cause serious damage to the financial technology industry that is booming during the new crown epidemic. Anxiety.

U.S. congressmen hope that those engaged in bitcoin and other digital asset transactions should also comply with reporting rules similar to those governing the sale of stocks and other securities: brokers will be required to report information such as how much money people have paid for cryptocurrencies.

This proposal worries many people in the cryptocurrency industry. They worry that they will encounter a series of new regulations, and they may not be able to completely get rid of them for many years to come. They believe that the new reporting requirements may harm the economic viability of the cryptocurrency market. During the epidemic, new users of the cryptocurrency market increased rapidly.

Taking into account the huge tax revenue that the new bill may obtain, and the progress made in the bill, many people believe that the relevant provisions in the bill may not be completely abolished. Therefore, they will focus on making small improvements as much as possible.

Including block chain Association (Blockchain Association), Coin Center) and digital assets Market Association (Association for Digital Asset Markets) , including industry organizations issued a statement outlining objections to these requirements, in particular, the statement pointed out that the draft might Lead to terms for individual users.

Perianne Boring, founder and chairman of the Chamber of Digital Commerce, said in an interview on Friday that her organization proposed to amend the language of the bill, tighten the definition of brokerage activities, and encrypt Currency miners and decentralized finance (DeFi) platform operators are excluded.

Bohn said: Putting this idea into the Constitution of Congress, or generating income for completely unrelated things, is not the preferred or correct way to promote the best policy. She pointed out that the Digital Asset Market Association and other institutions have repeatedly asked the IRS to provide more guidance on how to enforce existing laws.

Michelle Bond, CEO of the Digital Asset Market Association, said: It is vital for the industry to provide technical assistance for proposals of this size .

Tax compliance is considered to be a major issue for cryptocurrencies, and lawmakers expect that the proposal is expected to collect $28 billion in taxes (from the cryptocurrency industry), which can fund their huge spending plans and is therefore a must.

However, this issue is very complicated and may affect banking law and securities law. It also spans the jurisdiction of the US Congress, from the taxation committee to the banking committee.

Before proposing measures to strengthen cryptocurrency reporting requirements, the Republican Party rejected a plan to strengthen its enforcement efforts by substantially increasing the IRS budget — the Democrats are expected to resolve this issue in a separate tax settlement.

The Commissioner of the Internal Revenue Service Charles Rettig (Charles Rettig) has repeatedly asked lawmakers to give him more powers to improve tax compliance in the cryptocurrency industry. In the cryptocurrency industry, many market participants do not know their obligations, or openly commit illegal acts.

Although executives in the cryptocurrency industry vowed to oppose these proposals, they may face a difficult battle.

The plan is about to be voted quickly in the U.S. Senate, and lawmakers have been struggling for weeks on how to pay for the plan. At this stage, they are obviously unwilling to watch the infrastructure proposal pass halfway.

In fact, almost no U.S. congressman understands cryptocurrency and its relationship with taxation, which means that any lobbying requires a massive education campaign. On this issue, the most professional member of the US Congress, Ohio Republican Senator Rob Portman (Rob Portman) happened to be one of the main authors of this broader infrastructure package.

Portman’s spokesperson Drew Nirenberg said in a statement: “This legislative provision does not redefine digital assets or cryptocurrencies as’bonds’ for tax purposes. There is no questioning. The privacy of a single cryptocurrency holder does not force software developers and cryptocurrency miners and other non-brokers to comply with the reporting obligations of the US Internal Revenue Service. It just clarifies that any individual or entity acts as a broker to facilitate customers. Transactions and receipt of cash must comply with standard information reporting obligations.”

Most of the proposal is exactly the same as the reporting system that requires people to implement when they sell stocks in companies such as Apple or Ford.

Brokers will be required to report the so-called “basis” of their clients, that is, the price at which they purchase cryptocurrencies, and their total income-in this way, calculating their tax bills will be much easier. Long-term research has shown that when people know that other people will report their income to the IRS, they are less likely to evade tax liability.

The U.S. congressmen also hope to include the anti-money laundering provisions required by the Treasury Department, requiring transactions worth more than $10,000 to be reported to the government.

Behind the scenes, lawmakers discussed whether the definition of brokers should be further expanded in the provisions to cover decentralized exchanges (without traditional intermediaries) and peer-to-peer transactions, although some people said that the provisions of the proposal are broad enough to be completely It can cover other fields such as cryptocurrency miners.

Extending the definition of “broker” is really surprising, says Lisa Zarlenga, a partner at Steptoe & Johnson LLP who studies cryptocurrency taxation issues.

Another source of controversy is that the terms may extend beyond cryptocurrencies and extend to other types of digital assets, such as NFT (non-fungible tokens).

The U.S. Treasury Department has been formulating rules to tighten reporting requirements for brokers such as Coinbase. However, with the signature of Congress, the Treasury Department will not have to worry about any potential legal challenges when it issues new regulations in the future.

Industry executives vowed to fight a fight.

Kristin Smith, executive director of the Blockchain Association , expressed disappointment at the hastily drafting of this legislation at the last minute, saying that it may impose new requirements on all the different participants in the ecosystem.

She said: We believe that this may promote a large number of participants, companies and individuals involved in the encryption field to go overseas, which will really stifle innovation in the U.S. encryption field.

Although the plan is said to levy 28 billion U.S. dollars in taxes, this figure is highly uncertain, and this estimate immediately caused some people’s dissatisfaction.

Although congressional budget staff are often very sure about predicting the cost of tax changes that can be followed, such as the expansion of the child tax credit, it is not easy to predict when faced with more novel policy proposals.

The challenges facing cryptocurrencies are particularly daunting because their valuations can fluctuate sharply, it is difficult to know how many people are buying and selling these assets, and forecasters will have to guess the tax rate they might pay.


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