To help fund the $1 trillion bipartisan infrastructure bill, the Senate has proposed a provision that would impose stricter rules on how “digital assets” are taxed.
In the latest version of the bill, released on Sunday, the provision would require crypto “brokers” to report specific information about crypto transactions, like price points from when users bought in and sold. This would be in addition to reporting transactions of more than $10,000 to the Internal Revenue Service (IRS), which is already mandated.
The provision’s definition of a “broker,” however, has sparked concern within the crypto community. Currently, the bill defines a “broker” as “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.”
This, according to many within the crypto space, is too broad. A primary concern is that the current definition would target miners, developers, stakers and others who do not have customers and therefore wouldn’t have access to the information needed to comply.
As a result, lawmakers are working to clear up this confusion and are reportedly rewriting this provision to include a more specific definition. A spokesman for Sen. Rob Portman, R-Ohio, who drafted the bill, clarified to the Washington Post that the legislation wouldn’t “force non-brokers, such as software developers and crypto miners, to comply with IRS reporting obligations.”
This is good news for everyday crypto investors. While the original definition wouldn’t have impacted investors directly, the language previously could’ve pushed crypto business and trading overseas. That would have impacted the overall crypto market, indirectly affecting individual investors.
With the Senate reworking the langauge of the provision, crypto investors shouldn’t be worried, Anjali Jariwala, certified financial planner, certified public accountant and founder of Fit Advisors, tells CNBC Make It.
Jariwala reiterates that the crypto regulation within the infrastructure bill will primarily impact exchanges, not individual investors, miners or developers.
Plus, this is just a first step for crypto regulation, she says. It is likely to prompt more clear guidance in the future.
When a law regarding tax reporting requirements is passed, the IRS then writes the law into the tax code. The IRS is supposed to interpret what Congress means and issue regulations accordingly, Jariwala says.
The provision in this bill is more to establish Congress’ intent, rather than lay out specific rules. “This bill will probably be the first step of further regulation of cryptocurrency,” Jariwala says. If passed, lawmakers will discuss the regulation before it becomes a law, she says.
Jariwala also says that well-thought-out regulations would be beneficial to the crypto industry in the U.S.
“I don’t see how an industry as big as crypto could continue to operate without any regulation or oversight,” she says. “If people want crypto to become more of a mainstream asset, then I think this is a necessary first step in the process of becoming more ingrained in mainstream financial services.”