In case you’ve missed the news over the last few days, Congress is finalizing the bipartisan infrastructure bill, and that means they need to pretend they’re going to pay for it.
Part of this so-called “pay for” is a $30 billion line item that would come from “greater crypto taxation enforcement”. Congress, probably rightly, estimates that there are significant, untaxed crypto gains they would like their cut of. How they get to the $30 billion seems about as made up as their read on inflation.
Crypto advocate and attorney Jake Chervinsky posted a great thread detailing the problems with the language. Click to view the full thread below:
1/ 🚨 Here’s the deal with the US infrastructure bill:— Jake Chervinsky (@jchervinsky) July 30, 2021
A new provision has been added that expands the Tax Code’s definition of “broker” to capture nearly everyone in crypto, including non-custodial actors like miners, forcing them all to KYC users.
This is not a drill 👇
Essentially congress is redefining what it means to be a “broker” and it could include everyone from hardware wallet providers to crypto miners. They would then be required to issue 1099’s to anyone they sold crypto to or transacted with. Obviously, a hardware wallet provider isn’t going to know everyone an individual customer transacts with.
This functionally could mean that it’s illegal to provide basic crypto services like hardware wallets to Americans, and that could lead to a major chilling effect on crypto innovation within US borders.
Some have said that major concern is an overreaction. However, it is important to remember the history of how online poker was shut down in the US. Bush signed the SAFE Port Act in 2006, and it attached language around making it illegal for banks to transact with online poker sites. This was used in 2011 by Eric Holder and the Obama administration to crack down and eliminate major poker sites from operating in the US.
This kind of language around crypto is dangerous, and it could certainly be used as a kill switch later. Neeraj and the team at Coin Center, a crypto lobbying group, are working with senators to ensure they understand the ramifications of this terrible language passing.
According to Jerry Brito, this softer lobbying effort is the best tactic in the short term, but if a broader campaign of contacting representatives from the crypto community is warranted, everyone needs to step up and call their Congressperson as soon as possible.