Here’s the latest on the controversial crypto tax provision
Much was made last month about the crypto tax provision that was lumped into the massive infrastructure bill that the Biden administration has been seeking to push through Congress. The bill has been stalled, but now the “U.S. House of Representatives voted to pass a bipartisan infrastructure bill that contains a controversial cryptocurrency tax reporting requirement.”
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Read this whole thread but (as noted here) pay special attention to what happens with Treasury (I will too). There is bipartisan support to right this wrong in the Senate but Biden’s Treasury Dept is seemingly hostile to digital assets (progressives opposed to progress). https://t.co/pUWBBi69hm
— Cynthia Lummis (@CynthiaMLummis) November 6, 2021
Another provision in the bill to amend tax code section 6050I has worried the crypto community as it would require recipients of transactions over $10,000 to “verify the sender’s personal information and record their Social Security number, the nature of the transaction and other information, and report the transaction to the government within 15 days.” This draconian measure was supposed to apply only to in-person cash transactions over 10k, and when applied to crypto and NFT’s, would cause almost impossible compliance. The language in the bill defines “cash” to include “any digital asset.
In other words, Businesses and exchanges will have to file Form 8300 every time they receive crypto more than 10K Impact on you. To quote the head of Tax Strategy at CoinTracker: “Say you buy a Tesla with 1 BTC valued 60K. You’ll have to provide all your personal ID info to the seller leading to privacy and surveillance concerns.” The most impactful piece of the legislation is the reporting requirements, though. “Crypto exchanges will be required to issue 1099-Bs for the 2023 tax year similar to stock brokerages. Expect a lot of inaccurate 1099-Bs if you trade across multiple wallets and self-custody crypto.”
If passed, Tax code section 6050I may apply to in-person crypto transactions over $10,000 and require recipients to verify the sender’s personal information, record SSN, nature of the transaction and “other information”, w/in 15 days. #nftlaw https://t.co/NMIbH1bOLd
— Defi Defense Lawyer (@defidefenselaw) November 6, 2021
The implications on crypto are vast, and nothing has changed in the original language that caused an uproar in the community. It appears that miners, validators, node operators and the like would still be swept up in this broad re-definition of ‘broker.’ However, there is still a lack of clarity in the bill, and there is still much ambiguity about how it will be constructed when implemented in 2023. The Treasury department will have to determine how to interpret it, which is absurd, because laws should be passed with clear language leaving no ambiguity.
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Abraham Sutherland, a professor from the University of Virginia said of the development: “It’s bad for all users of digital assets, but it’s especially bad for decentralized finance. The statute would not ban DeFi outright. Instead, it imposes reporting requirements that, given the way DeFi works, would make it impossible to comply.” The bill is a clear affront to privacy and financial freedom, and goes against all the work done to make DeFi a possibility. Failing to report digital asset transactions would be potentially considered a felony under this provision.
However, with this obvious bad news, Bitcoin is still holding its ground, which shows how strong the market is right now. This type of news could’ve wrecked the price in a weaker environment. In many ways, it displays just how vital crypto, decentralization and privacy are. The very bill highlights the need for crypto. The good news is, the wheels won’t start turning on this until at least 2023, and we need to make sure our politicians denounce this bill and vow to make sure it never sees the light of day.
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Text source: CryptosRus
