CEO Bobby Zagotta discusses the factors behind the rise of digital currencies.
Congress approved a bipartisan $ 1.2 billion infrastructure bill on Friday that includes a controversial new cryptocurrency tax requirement, despite months of aggressive lobbying by industry groups seeking to fend off stricter regulatory oversight.
The House approved the infrastructure package on Friday night in a vote of 228-206, sending the bill to Biden's desk for signature after months of painstaking negotiations. It is unclear when the president intends to sign the measure.
One of the bill's main revenue-raising drivers is an effort to curb tax evasion in cryptocurrencies by imposing a number of new industry tax reporting provisions that apply to digital assets such as cryptocurrencies. and non-fungible tokens, or NFTs.
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In 2018, the IRS aforementioned third-party analysis that suggested the tax gap - the difference between what is owed and what is actually paid - in cryptocurrency capital gains was roughly $ 11.5 billion in 2017. But like the Fiscal Foundation noted in an August blog post, it is reasonable to think that the deficit has widened since then, given the substantial increase in the market capitalization of cryptocurrencies. (Under current law, the IRS treats cryptocurrencies as assets like stocks, rather than real currency.)
A new provision in the bill would require brokers to report those transactions of digital assets, such as bitcoin or ether, to the IRS in the form of a 1099 form. Brokers will also need to disclose the names and addresses of clients. However, crypto advocates and other critics have argued that, as written, the bill's definition of who qualifies as a "broker" is too broad.
Another aspect of the bill would require businesses and exchanges to report when they receive more than $ 10,000 in cryptocurrency.
But critics worry that, as written, the definition of a "corridor" layout it's too wide. Crypto advocates worry that the current language could potentially target those without customers who would not have access to the information necessary to comply. In response to these fears, the US Treasury Department said in August that will not target non-runners, such as miners, hardware developers, and others.
The proposal defines anyone "responsible for regularly providing services that facilitate digital asset transfers, which could end up including people such as software developers and cryptocurrency miners who do not fit in with what we would normally define as brokerage services," he wrote. the Tax Foundation. . "The result could be a substantial increase in compliance costs for the industry, as well as offshoring, which certainly seems feasible for an industry as virtual as digital currency."
Proponents of the original measure have argued that exempting decentralized exchanges or cryptocurrency miners from reporting requirements could create a "two-tier cryptocurrency market" and encourage an "unregulated shadow financial market." The nonpartisan Joint Tax Committee estimated that the policy would generate about $ 28 billion in new revenue over the next decade.
In August, the Treasury Department pledged not to target non-brokers, such as miners and hardware developers. However, that promise does not guarantee that future administrations will not go after these individuals.
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The provisions are not scheduled to go into effect until January 2024, which means that crypto lobbyists will likely push through different legislative avenues to water down the regulation.
The money generated by the stricter regulation will help pay about $ 550 billion in new funding over the next decade for roads, bridges, railways, transit, water, and other "traditional" infrastructure programs. Other payments in the infrastructure bill include the reuse of unspent coronavirus relief funds, along with the recovery of fraudulently paid unemployment money, unemployment money returned by states that prematurely terminated a $ federal benefit. 300 a week, specific corporate user fees, and investment-created economic growth.
