Recently, there’s been much regulatory activity around crypto; anyone whose business deals with digital assets will need to pay attention.
The entire cryptocurrency industry is waking up to a new reality. Politicians and regulators have decided to wade into the space, which had flown mainly under their radar until now. A House committee chair is launching a working group; the Securities and Exchange Commission is seeking new authorities to regulate digital assets as securities; and the Senate-passed infrastructure bill includes $28 billion in tax revenues from crypto transactions.
This last handful of weeks has arguably seen more regulatory activity around digital currencies since the name Satoshi Nakamoto first entered the popular lexicon. Anyone whose business deals in this asset class will need to pay close attention.
Digital asset provision in the infrastructure bill
The Senate’s $1.2 trillion infrastructure framework, which became the Infrastructure Investment and Jobs Act, enjoyed strong bipartisan support. However, one of the more contentious provisions is a “pay-for” related to reporting and taxing cryptocurrencies.
Proponents of the provision say it will help close the “tax gap” and generate approximately $28 billion in new revenue. Specifically, the provision would require anyone responsible for regularly effectuating transfers of digital assets on behalf of another person to be added to the category of “broker.” They would also be required to provide tax information to the Internal Revenue Service, including tax data to which — as some detractors claim — these new “brokers” do not have access. Proponents say cryptocurrency transactions should be reported and taxed like other tradable equities. Opponents of the provision argue it will include not only brokers but cryptocurrency miners and software developers, creating significant problems for the entire crypto industry and pushing innovation away from the United States.
The cryptocurrency industry lobbied hard against the provision. A bipartisan group of senators led by Republicans Pat Toomey, Cynthia Lummis and Rob Portman, plus Democrats Mark Warner and Kyrsten Sinema, proposed an amendment narrowing the scope of the reporting requirements. That amendment was rejected, and the broad “third-party reporting” provision was included in the Senate-passed bill. In an interview to Bloomberg, Lummis has vowed to press on, saying:
“Going forward this fall we’re gonna have to be much more proactive about defining terms in this space so people can still innovate.”
The bipartisan infrastructure framework now heads to the House of Representatives, where Representative Tom Emmer, co-chair of the Blockchain Caucus, is calling for amendments.
I, along with bipartisan Blockchain Caucus co-chairs @RepDarrenSoto, @RepDavid, and @RepBillFoster sent a letter to every single Representative in the House raising concerns about the Senate infrastructure bill being paid for by our crypto industry. pic.twitter.com/MzsEmBbosr
— Tom Emmer (@RepTomEmmer) August 9, 2021
We expect robust debate in the House about opening up the bill for amendments generally and addressing the cryptocurrency provision specifically. However, we do not expect House leadership to allow changes to the Infrastructure Investment and Jobs Act, as they want the bill passed and sent to President Biden.
Assuming the House effort to amend the infrastructure bill is not successful, a provision to narrow the scope of what a broker is could still get added to a reconciliation bill, moved as standalone legislation or tacked on to an end-of-fiscal-year funding bill. Outside of legislation, the Treasury Department has the ability to narrow the scope through its…
Read More: cointelegraph.com