Today, the U.S. House of Representatives is expected to vote on the bipartisan Jobs and Infrastructure Investment Act of 2021, a bill that will allow sweeping investments in sectors such as railroad, passenger transportation, bridge repair, clean water and sewage, clean power transmission, and high-speed internet access. The massive bill also includes a number of provisions that, if passed, would directly affect millions of crypto users, particularly the expanded tax reporting requirements for companies that process e-money transactions.

However, neither the legal force of the bill nor a vote in the House of Representatives on September 30th is guaranteed. The bill is passed by Congress along with the Budget Handling Bill, with several factions within the Democrats – the party that controls the majority of the Council’s seats but needs a clear party line for the initiative – supporting the bill. social policy provisions are included in the budget adjustment.

With political activism nearing the 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 law on infrastructure investment and employment will come into force in 2021. Even so, the way crypto-related provisions are contained in a crypto law like this one could give an indication of how Congress might pass important guidelines in the future that will affect the crypto space.

The point of contention is that provisions have been added to the bill that affect crypto users and businesses without looking at what the industry thinks of the problem.

Ben Weiss, CEO of crypto ATM provider CoinFlip, told Cointelegraph:

Industry leaders have not had the opportunity to weigh or discuss policy changes that would cause major disruptions to the crypto ecosystem. We believe that more dialogue is needed between Congress and members of this fast growing industry to result in clearer and better policies that benefit everyone.

At the same time, Jahon Jamali, co-founder of crypto investment firm Sarson Funds, doesn’t think passing the bill will have a long-term negative impact on the digital assets space as the pace is way ahead of the industry. state skills. to make up for it. Jamali added:

I am sure that the huge size of the bill and the amount of money the government plans to spend will have an impact on finances in general and will most likely spur more innovation in the fintech industry to lay a foundation for the future for a blockchain -based system.

Brock Pierce, President of the Bitcoin Foundation, expects the market “will react over time by adapting to the reality of further regulations”. Pierce hopes crypto companies and entrepreneurs will work with regulators to work towards leaner regulations as the industry’s political clout grows.

In fact, the requirements of the bill will only take effect after 2023 – a very long time by the standards of the crypto universe.

Shaun Hunley, tax advisor at software company Thomson Reuters Tax and Accounting, believes that even if the bill is not passed today, some form of law will be passed requiring reporting of cryptocurrency information “in the interest of the government to fight tax evasion” .

Many of these actors do not interact with the parties making transactions on the blockchain and therefore may not have access to their personal data, which would make compliance impossible.

Who are the brokers?

A main concern of the crypto community in relation to the proposed legislation is that the section on the tax code extends the definition of a cryptocurrency “broker” beyond the platforms – and introduces corresponding reporting requirements – cryptocurrency exchanges on entities such as software developers, distributors, 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 their personal data, which would make compliance impossible.

Stan Sater, Corporate & Technology Attorney at Founders Legal, believes the confusingly significant expansion of the definition is the result of legislators’ lack of understanding of how to deal with cash reporting. Sater commented on Cointelgraph:

Instead of relying on self-certification, governments often send intermediaries to gather the information they need to pay taxes. In the financial markets, these intermediaries are brokers. So you need to broaden the definition of broker, but how can you do that for digital assets and get people involved in the industry? The government really didn’t know how to deal with this, but they had a problem and suggested an extremely broad definition of “broker” to get almost everyone to join. The digital finance industry includes individuals.

According to Sater, the proposed requirements are “extremely vague” and could lead to “mandatory surveillance of all”.

But even if the law is passed in its current form, the draft won’t automatically become law, said Olya Veramchuk, director of tax solutions at blockchain data and software company Lukka. Veramchuk says:

The Ministry of Finance has to propose regulations and solicit input from the public. It is time for industry participants to put their fingerprints on the regulatory landscape and educate regulators on the intricacies of the digital asset space, which will hopefully lead to more feasible and workable tax laws.

More monitoring and reporting

Another piece of legislation that has stirred up some in the crypto world is Tax Code 6050I section which, according to the Proof of Stake Alliance crypto advocacy group, “could make receiving digital assets a crime if not properly reported”. The provision applies to anyone receiving more than $ 10,000 and requires them to report the sender’s personal information to the government.

Thomson Reuters Tax and Accounting’s Hunley believes the requirement, while not new, could reduce the appetite of some companies for cryptocurrency adoption. Hunley commented:

I treat digital assets as cash only for the purpose of reporting currency transactions. Only serious investors use cryptocurrencies to make transactions over $ 10,000, and these are the types of transactions the IRS wants to know about. However, I believe that this new requirement could prevent companies from accepting cryptocurrencies as a means of payment.

Lukka’s Veramchuk also notes that the rules set out in Section 6050I are not new and therefore “are not appropriate to be viewed as improper control of those involved in digital asset transactions”. She added that these rules should only be applied in a way that is practical, meaningful, and achievable within the decentralized digital asset ecosystem.

Hunley concluded that the bill “could be confusing for taxpayers”. He added:

The government will essentially treat cryptocurrencies as assets for one purpose (reporting taxable income), cash for another (section 6050I reporting rule) and securities for another (section 6050I reporting rule).