By AFP Staff
New federal regulations on cryptocurrencies quietly being debated in the Senate would kill online currencies and force them offshore, according to multiple reports published in the past few days.
The Senate passed the $1 trillion infrastructure bill on Aug. 10 with 19 GOP members voting in favor of it.
Dueling amendments to the $3.5 trillion infrastructure bill currently being debated in the Senate have a host of negatives attached to them that would kill innovation in the U.S. and force developers as well as many traders offshore. It is anyone’s guess what is going to come out of any compromise on these competing amendments, but the bottom line is, the amendments are not necessary and will prevent average people from benefiting from cryptocurrencies. One such deal that would have curtailed regulations was killed on Monday night, leaving the original language in the infrastructure bill as is.
So what does the infrastructure legislation propose?
According to experts, the Senate is seeking to impose strict new tax rules on cryptocurrency transactions that would apply to anyone even though it’s purportedly meant to be targeted at brokers of digital assets, requiring them to report on all crypto trading gains. According to multiple reports, crypto miners and digital wallets would be included in this and would have to report to the IRS and send clients 1099s. Of course, the problem with this is that many users would simply move their cryptos or even their entire operations to other countries that do not have laws like this, putting U.S. companies out of business.
Sens. Mark Warner (D-Va.) and Kyrsten Sinema (D-Ariz.) introduced an amendment to clarify what a broker is, but there has been considerable pushback against this as the proposed new language doesn’t go anywhere near far enough to protect U.S. businesses and average users from onerous tax requirements , as related by this graphic here.
Up until this point, the IRS has considered cryptos to be assets that would be taxed only if they were converted into U.S. dollars. People are increasingly using cryptos to make purchases, thereby avoiding what are essentially capital gains taxes. Obviously, federal officials want a piece of this trillion-dollar market and see the potential to collect a massive tax windfall on cryptos.
The Senate is expected to vote on the infrastructure bill any time now. If it passes, it will have to go back to committee to reach a compromise with the House, which only passed part of the Biden’s administration infrastructure proposal totaling $715 billion.
