‘Pernicious’ Reporting Clause Irks US Crypto Industry as House Votes on Infra Bill
US Congress could finally approve or reject the much-maligned Infrastructure Bill today after the draft law was finally slated for a vote.
The ruling Democratic Party has a narrow eight-seat majority and will likely need a near-unanimous vote in favor with few or no abstentions for the measure to pass – with the Republican Party determined to derail the bill.
The draft law will be used to fund trillions of USD worth of public spending, but crypto advocates are concerned that key clauses in the bill unfairly target the crypto sector – chiefly the fact that the existing IRC Section 6050I clause of the tax code will be expanded to include the words “any digital asset.”
Introduced in 1984, Section 6050I calls upon businesses and individuals receiving cash or a wired bank transfer worth over USD 10,000 to file a form to the Internal Revenue Service (IRS) and report the sender’s personal data – including their name, address, and social security number.
Per the IRS’ own terminology, the clause “requires that any person engaged in a trade or business that receives cash in excess of USD 10,000 in a single transaction or in related transactions must file Form 8300.”
This would essentially force decentralized finance (DeFi) and crypto users to disclose key aspects of their activities or risk the ire of the tax authorities.
Patrick Dugan, the founder of TradeLayer, urged crypto-friendly deputies to “please save US citizens from being criminalized for using cryptoassets.”
Soon the only way a person born in the USA will be able to do *anything* in any scale with these technologies, without KYCing everyone or becoming a felon, will be to a) leave and b) operate with a non-US entity and ideally non-US employees/directors.
— Patrick ₿ Dugan _ _____________________________ (@duganist) November 4, 2021
The lawyer Jake Chervinsky, a Strategic Advisor at Variant and an active pro-crypto campaigner, wrote on Twitter to urge calm. He opined that “nothing will happen right away” as the “crypto provisions don’t go into effect until 2024 (for FY2023 reporting).”
He added:
“We can try to get them repealed or amended before then. They also need rulemaking from [the] Treasury to define their scope. We’ll be active in that process.”
Although he conceded that the “crypto provisions are just as bad as they were months ago,” he remarked that “the political reality is: It’s out of our hands now.”
In a separate tweet, he justified his somewhat stoical stance.
Here's the truth: we've dodged most of the regulatory fire so far, but things will likely get worse before they get better.
— Jake Chervinsky (@jchervinsky) November 4, 2021
To the extent I seem overly optimistic, that's a strategic choice. It's the best way to be effective, & when I *do* need to sound the alarm, you'll listen.
The head of the crypto pressure group Coin Center Jerry Brito also wrote on Twitter that the clause was “a big deal” and noted that “it was part of the same tax reporting provision that we fought in the Senate.”
He called it “pernicious” and reminded that Coin Center had already pledged to challenge the “proposed new requirement it in court if it became law.”
But Brito added a note of skepticism about bill’s chances in the House, writing:
“While House leadership wants to vote on the bill this week, it has already been [scheduled] and postponed twice because of disagreement within the Democratic caucus. [It] wouldn’t surprise me if that happened again.”
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Learn more:
– FATF Wants to ‘Gut’ DeFi with ‘Vague’ New Guidelines, Say Crypto Players
– US Government Unrealized Gains Tax Plans Might Hit Crypto ‘Billionaires’ Too
– a16z Lays out Regulatory Proposal as SEC Chief Focuses On Consumer Protection
– US Infra Bill Provision May Force Crypto Users To Report USD 10K+ Transactions
– Congressional Researchers Remind Of Crypto Regulations Risks
– Regulators are Coming for the DeFi Goose and Its Golden Eggs
