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US Tax Bill Seeking USD 28B From Crypto Clears 1st Test, Amid Strong Criticism

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Last updated: June 26, 2023 06:54 EDT

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Sead Fadilpašić

Journalist

Sead Fadilpašić

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Sead specializes in writing factual and informative articles to help the public navigate the ever-changing world of crypto. He has extensive experience in the blockchain industry, where he has served...

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Last updated:

June 26, 2023 06:54 EDT

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A US bipartisan infrastructure bill that might raise USD 28bn from crypto investors has been voted to advance, with a number of crypto industry insiders strongly opposing it.

The US lawmakers are looking into tightening the regulatory rope around crypto to squeeze more money out of the sector by applying new information reporting requirements – thus raising more in taxes.

The bill passed the first test Wednesday evening and was voted to advance.

Per Forbes, this is a strong signal that it has a chance at becoming law, but that “it will still need to pass the House, where progressives are demanding it be tied to a USD 3.5trn spending package.”

The Cryptoverse is strongly criticizing the bill, finding it unfair, counterproductive, hypocritical, and destructive. “They’ve ruined they’re money so now they’re coming for ours,” commented Founder of Quantum Economics, Mati Greenspan.

Jerry Brito, Executive Director at Washington-based crypto lobbyist Coin Center, stressed that in the drafts they’ve seen, “the category of persons who would be obligated to report is so broad that it potentially covers persons who only provide software or hardware to customers and who have no visibility whatsoever into users’ transactions.”

Also, according to Kristin Smith, executive director of the Washington-based trade group Blockchain Association, the US Senate’s deal is “hugely problematic.” Bloomberg quotes her as saying that the provision could push some companies overseas.

Executives in the cryptocurrency industry argue that certain companies that may fall under this provision simply do not have the ability to collect the information that it calls for.

“We’re pushing every lever right now to change it,” added Smith.

Maya Zehavi, a blockchain-focused entrepreneur and Founding Board Member of the Israeli Blockchain Industry Forum, suggested that the lawmakers are hypocritical saying that “crypto is good enough to tax but not good enough to engage in productive regulatory discussions that don’t involve keeping the same TBTF [too big to fail] gatekeepers in place.”

Others too suggested the lack of discussions with the crypto sector and notice to crypto users on a decision of this magnitude.

And the discussions continue, with some finding that this tax would be difficult to enforce.

As for the bill itself, per the White House fact sheet, the US Senate and President Joe Biden struck a bipartisan infrastructure deal that includes USD 550bn for transportation and power systems.

And a part of this number would make an additional USD 28bn in taxes from cryptocurrency transactions.

Additional rules would be imposed on crypto brokers, requiring them to report transactions of digital assets, including virtual currencies, to the Internal Revenue Service (IRS) – all businesses would have to report crypto transactions of more than USD 10,000.

“In the years ahead, the deal will generate significant economic benefits,” reads the fact sheet. “It is financed through a combination of redirecting unspent emergency relief funds, targeted corporate user fees, strengthening tax enforcement when it comes to crypto currencies, and other bipartisan measures, in addition to the revenue generated from higher economic growth as a result of the investments.”

This proposal comes comes amidst the IRS enforcement officials’ increasing warnings that crypto is a growing escape zone for people looking to hide their income.

Senator Rob Portman of Ohio, the lead Republican in the infrastructure talks, was quoted by Bloomberg as saying that concerns about crypto transparency have been building in Congress for some time, saying “everybody’s been talking about the appropriate way to provide more reporting in particular and that leads to better compliance.”
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