WASHINGTON: What does Bitcoin have to do with roads and bridges? A lot in the US Congress at the moment. One way lawmakers are proposing to pay for the $ 1 trillion infrastructure bill that the Senate passed Tuesday is to impose tax filing obligations on cryptocurrency brokers, just as they do on stockbrokers. Reporting your customers’ sales to the Internal Revenue Service (IRS), which could pave the way for tighter regulation of cryptocurrencies that the Biden government is moving towards as it also promotes tax compliance.
The plan could generate approximately $ 28 billion in revenue over 10 years, Congressional accountants estimate.
A look at the situation:
WHAT’S THE STORY WITH CRYPTOCURRENCY?
The cryptocurrency market has exploded to an estimated $ 1.8 trillion. They are basically lines of computer code that are digitally signed every time they travel from one owner to another. They are not affiliated with banks or governments, they allow users to spend or receive money. This appeals to libertarians, off-grid types, and risky millennials who believe the financial system is rigged, but it is also favored by international criminals, money launderers, drug traffickers, and ransomware hackers.
The most widely traded cryptocurrency is Bitcoin, valued at around $ 45,000 each, up from an April high of around $ 64,800. It’s notoriously volatile, in some cases exploding or plunging into the public statements of Elon Musk, the provocative CEO of Tesla Inc. Some companies are now accepting bitcoin as a form of payment. Other well-known cryptocurrencies are Ethereum, Dogecoin, Ripple and Litecoin. There are thousands in total. Bitcoin and others can be bought and sold on exchanges with US dollars and other national currencies.
WHERE DO GOVERNMENT OFFICIALS STAND?
On both sides of the coin.
Some lawmakers see cryptocurrency as a source of technological innovation, particularly in the development of blockchain, the digital ledger that records transactions. Large US regulators, on the other hand, are at times see it as danger signals. Gary Gensler, Biden’s chairman of the Securities and Exchange Commission, said last week that investors need more protection in the crypto market, which he described as “full of scams, fraud and abuse” and “like the wild west.” While the SEC has won dozens of cases against crypto scammers, Gensler said the agency needed more authority from Congress and more funding to regulate the market.
Meanwhile, the Federal Reserve is considering developing its own digital currency pegged to the US dollar. A so-called digital dollar could enable faster payments between banks, consumers and companies. “There are federal agencies that are not on the same page,” says Suzanne Lynch, a professor at Utica College who focuses on financial crime. “It’s so gray at the moment.”
WHAT’S THE CONNECTION WITH THE INFRASTRUCTURE BILL?
The cryptocurrency debate landed amid the Senate’s work on the massive infrastructure package. An earlier plan to pay for the legislation, by bolstering IRS enforcement to crack down on tax cheating by individuals and businesses, went down as Republicans objected to expanding the agency’s reach. Area of activity of the agency. That would have generated an estimated $ 100 billion in 10 years.
Back to the drawing board for revenue collectors, the plan was developed for stricter tax reporting requirements for cryptocurrency brokers. The $ 28 billion it would generate over a decade is valued at only about a quarter of what the IRS enforcement proposal envisaged. It has raised various revenues from the Infrastructure Act, raised objections from some senators and unleashed a lobby bomb on the opposition cryptocurrency industry and advocacy groups for internet freedom.
The provision defines brokers too broadly, say opponents, of what could stifle innovation by unfairly imposing new tax reporting requirements on software developers and crypto “miners” who create coins by lending computing power to review other users’ transactions and assign coins receive exchanges. They don’t have access to cryptocurrency user data that the IRS would collect, say opponents who tabled amendments to the provision and a compromise was made but failed to get Senate approval, leading the debate over cryptocurrencies at the House of representatives.
WHAT’S THE SITUATION NOW WITH CRYPTOCURRENCY AND TAXES?
Some cryptocurrency brokers are already reporting transactions to the IRS, but most are not, experts say. Brokers place buy and sell orders for users on cryptocurrency exchanges. Exchanges are required to collect personally identifiable information from users and report their annual activity to the IRS. The IRS defines cryptocurrency as “property” similar to stocks or gold. That means you will pay taxes on capital gains if you sell them or trade them for a profit.
