The United States Congress recently passed the controversial $1,2 trillion Infrastructure Act, which will have implications on the crypto industry.
The Infrastructure Act, the legislation that was just passed by the United States Congress, will go into effect in 2023, bringing with it big implications for participants in the crypto industry. Through this law, the US government plans to raise $1,2 trillion over the next decade to invest in its infrastructure nationwide.
As Bit2Me News has explained, the Infrastructure Law has caused quite a bit of controversy in the crypto industry due to its intention to reinforce taxation on cryptocurrencies, and digital assets. In fact, with this law, the United States plans to collect about $28.000 billion in taxes from the crypto industry.
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Infrastructure Law and crypto industry
The Infrastructure Law was approved with 228 votes in favor and 206 votes against, last Friday afternoon. The majority of Congress chose to favor the current US administration's fiscal plan to improve the country's infrastructure. Now, this law brings with it great tax implications for the cryptocurrency industry. First of all, the Infrastructure Law imposes tax obligations on cryptocurrency brokers; a term that has been heavily debated and criticized for its broadness.
In the United States, cryptocurrency brokers, such as exchanges, custodians, intermediaries and other service providers related to these cryptoassets, will be subject to tax reporting and tax reporting to the Internal Revenue Service (IRS). .
Exchanges and cryptoasset trading companies
When drafting the Infrastructure Act, lawmakers modified the term “broker,” defined by the IRS, to include companies that trade digital assets, such as exchanges. However, although the Treasury Department clarified that the term “broker” will not be interpreted to include non-custodial entities, several legislators and the crypto community fear that the law could include non-custodians, such as software developers. , miners and cryptocurrency validators in the tax obligations imposed.
Cryptocurrency service companies and exchanges will be subject to reporting on their clients' transactions that exceed $10.000. The reporting includes form 1099, so custodian entities must collect personal information from their clients and users, such as names, social security number, among others, if the operations they carry out exceed the limit established by law.
Minimize the tax gap
With the recent law, regulators and the IRS seek to minimize the current tax gap. According to Chuck Rettig, commissioner of the IRS, cryptocurrencies have increased the tax gap in the country by favoring tax evasion with their anonymity. The recent law is approved amidst surprising and exponential growth for the crypto industry, both in terms of adoption and value. As of this writing, the cryptocurrency market exceeds 2,98 trillions of dollars; with Bitcoin at the forefront, with a value of more than $61.000 per BTC.
Cryptocurrencies are here to stay
On the other hand, although the recently approved Infrastructure Law may bring great risks for participants in the crypto industry, its approval also means that the US government is accepting that cryptocurrencies are here to stay. Let us remember that the government's plan is to raise about $28.000 billion from cryptocurrencies over the next 10 years. Thus, it is assumed that the government accepts the existence and permanence of cryptocurrencies over time.
A risky law for the industry and DeFi
Before its passage, a group of congressmen, including Cynthia Lummis, Pat Toomey and Rob Portman, submitted proposed amendments to limit the scope of this law to non-custodial actors. However, the amendments presented were rejected and the law was approved by the Senate and, recently by Congress, in its original format.
The proposed amendments sought to protect non-custodians from tax requirements that would be unrealistic and impossible to meet, if required. In the DeFi ecosystem, which may not be exempt from the application of this law, the requirements would be impossible to meet because transactions occur peer-to-peer (P2P) and with a high degree of decentralization.
Kristin Smith, director of the Blockchain Association, assured in August that the approval of the Infrastructure Act could degrade the leadership of the United States over the crypto industry and force the expulsion of its participants to friendlier jurisdictions. Likewise, representatives of important cryptocurrency companies in the country are using their legal teams to study the recent law in depth, and learn what all its implications are specifically. He Crypto Council for Innovation He said via Twitter that he hopes to work with members of Congress soon to clarify the definition of a runner in the recently approved law, which lacks clarity.
The crypto community has already begun to express its rejection of the aforementioned law, which they call unconstitutional and anti-American, for violating the privacy and financial freedom rights of its citizens. “It is absolutely embarrassing to see this.”, are some of the comments that are read on cryptotwitter.
With the approval of the Infrastructure Law by the Senate and Congress, the promulgation of the current president of the United States, Joe Biden, is expected for the aforementioned law to be made official in the country.
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