Today the United States House of Representatives is expected to vote on the bipartisan Infrastructure Investment and Jobs Act of 2021, a bill that will allow massive investments in areas such as passenger rail, bridge repair, clean water and sewerage, clean power transmission, and universal high-speed internet access. In addition, the huge bill hides several provisions that, if passed, would directly affect millions of cryptocurrency users, in particular the expansion of tax reporting requirements for companies that process cryptocurrency transactions.
However, there is no justification for the bill to become law or for the House of Representatives to vote on it on September 30th. The legislation is being worked on in Congress along with the budget dissolution bill, and various factions of the Democratic Party (which controls most of the seats in the House of Representatives but needs a clear party line for the initiative) put their support for the Infrastructure Act by including certain social policy provisions in budget comparison.
With political maneuvers nearing boiling point, legal experts and actors in the crypto industry are thinking about the law that could become law in the next few hours.
The spirit of the law
It is currently unclear whether the Infrastructure Investment and Employment Act of 2021 in its current form will become law. Regardless, the way crypto-related regulations have found their way into a collective bill like this one could shed light on how Congress might pass important guidelines in the future that affect the crypto space.
One point of contention is that provisions that affect users and companies of cryptocurrencies have been included in the bill without taking into account the opinion of the industry on the matter.
Ben Weiss,CEO of the ATM operator Coin toss, He pointed this out to Cointelegraph:
“Industry representatives have not had a chance to weigh or discuss the policy changes that will seriously disrupt the cryptocurrency ecosystem. We believe there should be more dialogue between Congress and members of this fast-growing industry to lead to better and clearer policies that benefit everyone. “
At the same time, Jahon Jamali, Co-founder of the cryptocurrency investment company Sarson Fund, does not believe that the passage of the bill will negatively affect the digital assets space in the long term, because the pace of the industry is far beyond the government’s ability to catch up. Jamali added:
“I am certain that the huge size of the bill and the amount the government plans to spend will have an impact on the overall finances and will most likely fuel further innovation in the financial technology industry on a blockchain-based system.”
Rock pierce, President of the Bitcoin Foundation, he expects the market to “react over time by adapting to the reality of increased regulation”. Pierce hopes cryptocurrency companies and entrepreneurs will work with regulators to achieve more sensible regulation as the sector’s political influence grows.
In fact, the requirements set out in the bill won’t come into effect until after 2023, a very long time for the standards of the cryptocurrency universe.
Shaun Hunley, Tax advisor for software companies Thomson Reuters Taxes and Accounting, believes that even if the law is not passed today, some type of law will be passed requiring reporting on cryptocurrencies “because of the government’s interest in combating tax evasion”.
Many of these agents do not interact with the parties making transactions on the blockchain and therefore may not have access to your personal data, which would make regulatory compliance impossible.
Who are the brokers?
The main concern of the crypto community in relation to the proposed legislation is the section of the tax code that extends the definition of a cryptocurrency “broker” (citing the relevant disclosure requirements) beyond cryptocurrency exchange platforms to include entities such as software developers, stakers, Include node validators and miners.
Many of these actors do not interact with the parties making transactions on the blockchain and therefore may not have access to your personal data, making compliance impossible.
Stan Sater,Business lawyer and office technology Founder right, believes that the confusing expansion of the key definition is the result of a lack of understanding on the part of the legislator for dealing with the disclosure of cryptocurrencies. Sater commented on Cointelgraph:
“Generally, instead of relying on self-declaration, the government delegates the collection of the information it needs for tax purposes to intermediaries. In the financial markets, these intermediaries are the brokers. Definition of ‘broker’, but how do you go about it? Include digital assets and everyone involved in the sector? The government doesn’t really know how to go about this, but they have a problem so they developed an incredibly broad definition of ‘broker’ that almost everyone involved in the digital finance industry, including individuals. “
According to Sater the proposed requirements are “incredibly vague” and could lead to “forced surveillance for everyone”.
But even if the bill were passed in its current form, the language of the bill would not automatically become law, he said. Olya Weramtschuk, Director of Tax Solutions at blockchain software and data company Lukka. Veramchuk said:
“The Ministry of Finance would have to issue a proposal for a regulation and solicit public contributions. This would be the time for the industry participants to bring their footprints into the regulatory landscape and to educate the regulatory authorities about the complexity of the regulatory space, leading to sustainable and more practicable tax law. “
More vigilance and explanations
Another bill that has irritated some in cryptocurrency circles is Section 6050I of the Tax Code, which, according to the Proof of Stake Alliance crypto advocacy group, “could make receiving digital assets a crime if not properly declared”. The provision applies to anyone who has more than 10,000 USDÂ asking them to share the sender’s personal information with the government.
Hunley, from Thomson Reuters Taxes and Accounting, believes the requirement, while not new in and of itself, could dampen the appetite of some companies to accept cryptocurrencies. Hunley commented:
“Amendment 6050I would treat digital assets as cash only for the purpose of reporting monetary transactions. Only serious investors would use cryptocurrencies to make over $ 10,000 and these are the types of transactions the IRS wants to know about. However, I think this new requirement could “deter companies from accepting cryptocurrencies as a means of payment.”
Lukkas Veramchuk also noted that the standards articulated in section 6050I are not new, and Therefore, it is “unreasonable to view them as inadequate monitoring of those who are involved in transactions with digital assets”. The caveat, he added, is that these standards should only be applied in practical, meaningful and achievable ways in the ecosystem. decentralized digital assets.
Hunley concluded that the bill “could potentially be confusing for taxpayers”. He added:
“The government would essentially own cryptocurrencies for a purpose (reporting of taxable income), Treat cash for another purpose (the reporting requirements of Section 6050I) and securities for another purpose (the broker reporting requirements) ”.
In his opinion, good tax policy is that Cryptocurrencies are treated as a unit in all respects.
As of September 30, 2:00 p.m. ET, it is still unclear whether the 2021 Investment in Infrastructure and Employment Act will be brought to plenary today.