The US House of Representatives has blocked all attempts to change the tax rules for Bitcoin and other digital currencies contained in President Joe Biden’s infrastructure plan.
Bitcoin is stumbling and the latest news from Washington may be responsible. Last Tuesday, Democrats in the US House of Representatives rejected any changes to the US infrastructure bill. A few weeks earlier, in fact, the Senate, had passed a bipartisan infrastructure bill that would fund a wide variety of projects – including building bridges, roads and treating clean water.
In order to fund this project, those who own digital assets such as Bitcoin are now to be included. As a result, all constructs known as brokers would now have to file forms with the United States Internal Revenue Service (IRS) on behalf of their clients. In addition to crypto exchanges, this would also affect miners, stakers, and protocols from Decentralized Finance (DeFi). Projections suggest that it would be possible to generate up to $28 billion in tax revenue as a result.
Setback for the crypto space
These requirements are certainly achievable for centralized exchanges like Coinbase or Binance. However, crypto lobby groups like Coin Center argue that the new definition of broker is too broad. Coin Center criticizes that the new definition of broker includes those responsible for processing transactions on the blockchain.
The lobby sees the problem as being that it would be simply impossible for Bitcoin miners, stakers, and decentralized protocols in particular to get all the data the IRS is asking for. These actors could not possibly comply with these requirements given the decentralized and pseudonymous nature of blockchains and cryptocurrencies, the crypto lobby argued. Privacy groups echoed that sentiment, calling the bill a backdoor way to tighten financial oversight.
A previous proposal by the crypto lobby last failed in the Senate after 87-year-old Alabama Senator Richard Shelby blocked it. While the Treasury Department under the Biden administration has reportedly hinted that it would tighten tax reporting requirements for miners und the same will not prevail, crypto lobby groups as well as Coinbase ‘s chief tax officer believe that the House of Representatives should have amended the bill that is now on the table.
Many crypto advocates had hoped that the House of Representatives would adjust the tax reporting requirement and comprehensively revise the bill. Now it’s clear that hope was in vain – yet there’s still chance to revise the bill.
Anna Eshoo gives bitcoin lobby hope
I will continue to explore all options to improve the flawed definitions within the infrastructure bill.
In addition to the politician, Blockchain Association executive director Kristin Smith also called for a rethink on the wording of the crypto bill.
Rather than clarify wording that isn’t even law, we encourage the House of Representatives to reject the bill. Only by working with the Bitcoin and crypto industries can the U.S. continue to be a leading innovator.
However, it is now too late to reject the bill at the U.S. House of Representatives level. The House voted 220 to 212 in favor of the $3.5 trillion stimulus bill. Joe Biden had already promised that he would sign the bill if the House of Representatives approved it. As the Washington Post reports, the crypto lobby is now planning to use the budget bill to influence the law after all.