Cryptocurrency Concession in the Infrastructure Bill

In late August 2021, the Congress of the United States reached a deal to approve a $3.5 trillion budget resolution involving a bipartisan infrastructure bill and voting rights legislation. While the infrastructure bill itself and the bipartisan process through which it was achieved was cause for celebration, it wasn't free of controversy—particularly as it concerns the growth and use of cryptocurrency. While the budget resolution has not passed the Senate as of this writing, there will most likely be some variation of this bill that eventually makes its way to the President's desk. Let's explore what this bill has to say about crypto and blockchain: 

 

READ OUR INTRODUCTION TO SMART-CONTRACT-AS-A-SERVICE (SCaaS)

 

 

At any point in history and at any place in the world, it is not uncommon for fast-growing sectors and industries to attract the attention of lawmakers. Since cryptocurrencies have become part of the nation’s collective consciousness, it is no exception. So, when a bill primarily written to fund the construction and upkeep of roads, bridges, airports, tunnels, et cetera contains a provision requiring crypto brokers—which are, of course, decentralized from any federal bank—to report activity to the Internal Revenue Service (IRS) and business to disclose trades of digital assets over the somewhat arbitrary limit of $10,000, many were taken by surprise. However, people and firms who have been paying attention were less shocked by this development. 

 

As the userbase of Bitcoin and other cryptocurrencies has increased—particularly in late 2020 and early 2021—members of Congress on both sides of the aisle have expressed both support and criticism (even to the point of advocating a ban, perhaps exacerbated by the Colonial Pipeline hack and ransom, which was paid in Bitcoin) for cryptocurrency. Some lawmakers see cryptocurrency as key to technical innovations, especially in the development of blockchain, while others, like President Biden’s SEC Chairman Gary Gensler have derided the crypto market as “rife with fraud, scams, and abuse.” 

 

For laypeople, Congress’ actions to regulate cryptocurrency and the transactions including them served as a wakeup call that sometime for Congress, for all its inefficiencies, can still move quickly and that it, or any legislature, doesn’t always need to thoroughly understand what is they’re legislating before laws are drafted.

 

 

Cryptocurrency

The original draft of the Infrastructure Bill included tighter regulation of cryptocurrencies, which has since been amended.

 

 

Up to this point, this sounds like a lot of bad news, especially for those of us in the blockchain, blockchain development, and NFT marketplace industries. Thankfully, though, this wasn’t the end of the story as it concerned the infrastructure bill and any crypto-related riders therein. A last-minute lobbying push by the cryptocurrency industry was enough to convince legislators to change the language in the bill as it concerned crypto. The amendment clarified the definition of a crypto broker and removed the language specifically targeting “any decentralized exchange or peer-to-peer marketplace,” replacing it with a broader definition characterizing brokers as “regularly responsible for providing any service affecting the transfer of digital assets on behalf of another person.”

  

Further, within the crypto industry, there has been a consensus that any strict tax enforcement should not apply to miners, creators of digital money, or the “node operators” who put the software behind transactions. The New York Times reports lobbyists believe they have received hints about the intent of the law, they are seeking assurances from the Treasury Department about its enforcement. Recent news reports have dried up since early August, but we’ll keep an eye open for updates. 

 

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