Infrastructure is the cornerstone to providing more jobs in the United States. The bridges, tunnels, and roads in many areas of the country are old and worn out. Creating a bill that would provide income for the renewal of infrastructure should help buoy growth and offer the opportunity to increase jobs growth. In addition, many congresspeople agree that infrastructure should also include broadband and even cryptocurrency trading.
The House of Representatives is currently revising the infrastructure bill that passed through the Senate in August. This bill includes several pieces of legislation that focus on regulation pertaining to cryptocurrency trading and the digital token industry as a whole. According to specific national-security individuals, the law in the Senate bill could further create a black market for cryptocurrency trading, which could have the reverse impact Congress is expecting.
The rule in the bill has a portion that says that anyone handling cryptocurrency trading needs to report the gross proceeds directly to the U.S. Internal Revenue Service. The bill would also require the name and address of any party participating in a cryptocurrency transaction. The IRS wants to capture billions of dollars in tax revenues lost each year due to the confidential nature of some cryptocurrency trading. There has been little pushback on the need for additional measures needed to monitor illicit cryptocurrency trading. Unfortunately, the bill was written in the Senate, and does not focus on trades. Instead, it includes everything from minors to producers of hardware and software used in a cryptocurrency transaction.
Ransomware Puts Cryptocurrency in the Limelight
Ransomware attacks by cybersecurity thieves have put cryptocurrency security back into the limelight. Demand for payment in cryptocurrency, which will allow companies to access their files after a cyber attack, has presented cryptocurrency trading poorly. These attacks have gained the attention of government oversight of cryptocurrency. The focus on these markets has spurred U.S. lawmakers into action to rein in opaque markets. The upshot is that once lawmakers get their hands on an idea, they tend to go overboard. If Congress overregulates, it may push specific industries further into the dark. It also may provide the impetus for criminals to find other methods and corners of the cryptocurrency world to evade law enforcement.
Where Does the Biden Administration Stand?
The Biden Administration has also weighed in over competing crypto amendments to the $1 trillion infrastructure bill. For the moment, the White House has chosen to back the side that isn’t as friendly to cryptocurrency trading. The Administration thinks that strengthening tax compliance in cryptocurrency trading will help contribute to the tax base. The White House and Congress believe that the tax laws employed if the infrastructure bill passes will raise $28 billion over a decade.
What Do Opponents Think?
The underlying issue is that the bill defines brokers too broadly. Many view a broker as someone that facilitates a transaction. For example, if you place a stock trade on the New York Stock Exchange, you need a broker who is a member of the exchange to place the transaction for you. Generally, a broker will garner commissions from this type of activity, and Congress wants to generate tax revenue from the revenue that is generated.
Those who oppose the bill say the definition is too broad, and these provisions will potentially cap innovation by unfairly putting new tax-reporting obligations on software developers. The law will also make it more difficult for cryptocurrency miners to make money, as any gains they experience through their activities will be taxed by the IRS.
What is the Current Tax Law in the U.S.?
Some cryptocurrency brokers report all of their cryptocurrency trading to the IRS. Cryptocurrency exchanges are expected to collate personal information identifying users and reporting their cryptocurrency trading directly to the IRS. Currently, cryptocurrency traders pay capital gains taxes when they generate gains from a cryptocurrency trade. A cryptocurrency is viewed by the IRS as property and therefore is a tangible asset that can be taxed.
The Bottom Line
The infrastructure bill has passed through the United States Senate and is now in the hands of the House of Representatives. Most of the infrastructure bill deals with bridges and roads, but portions of the bill deal with broadband, along with the internet and cryptocurrency. The bill that was passed on the Senate focuses on generating tax revenue and reporting transactions by brokers and anyone that handles cryptocurrency. This bill includes those who develop mining software as well as the miners themselves. Opponents of the bill believe that this could further push those not in transactional businesses further underground, creating a more profound problem in the cryptocurrency space than is currently apparent.