What Does the United States’ Infrastructure Bill Mean for Crypto Taxation?

What Does the Unites States’ Infrastructure Bill Mean for Crypto Taxation

A breakdown of the new crypto tax the U.S. has put in place.

On November 10, 2021, the U.S. passed a US$1.2 trillion infrastructure bill. The bill, or the Infrastructure Investment and Jobs Act, will ramp up government spending on public infrastructure like roads, bridges as well as water and broadband. The law was passed with a bipartisan vote of 69 to 30.

While all of these planned expenditures are good, there is one aspect of this law that has people worried. The infrastructure bill 2021 specifies tax reporting requirements for digital assets, like cryptocurrencies and non-fungible tokens (NFTs). This part of the law has received backlash. In fact, U.S. Senator Ted Cruz even calls the bill “a devastating attack on the crypto industry”. Let’s dive deeper into how this law will affect the crypto world.

Unclear definition of “broker” 

The law requires brokers to report trader information for transactions above US$10,000 to the Internal Revenue Service (IRS). What concerns the crypto community about this aspect of the law is how the term “broker” is left unclear. The law defines “broker” as “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person”. Experts think that the lack of clarity on the term means that it does not only include crypto exchanges, like Coinbase, but also miners and wallet developers. The law doesn’t take into account the transactions done without a crypto exchange, wherein the miner might end up being considered the broker. 

Another problem with this is that it gives the IRS an inaccurate amount of information about trading activity. This is because the IRS will be relying on crypto exchanges for the information, and the exchange itself has limited insight into what investors have paid for their crypto in the first place. 

Amendment of tax code section 6050I

The second aspect of this law that has made crypto and NFT investors nervous is that it seeks to amend the U.S. tax code section 6050I. This code requires recipients of over US$10,000 in cash transactions to verify the sender’s personal information. This personal information includes the sender’s social security number and the nature of the transaction, among other things. The recipient is expected to report these details to the government within 15 days. 

This, however, is simply not possible for crypto traders. This is because while crypto transactions are totally transparent and traceable, they are done through digital addresses. One person can own several addresses without any personal information linking them together. The cherry on top is that 6050I violations are a felony. With it being so hard to report transactions, a lot of traders could inadvertently end up becoming felons. This aspect of the bill also raises concerns about privacy and surveillance. 

These developments are not coming out of thin air. Crypto reporting requirements have been in the works as Biden has made them a priority in the 2022 budget. This bill in particular, though, will not come into effect until January 1, 2023, which means that there will be no reporting until 2024. In the meantime, crypto-lobbyists intend to push for amendments to adjust the provisions of this bill.

Header image courtesy of Freepik

SHARE THIS STORY

Share on facebook
Share on twitter
Share on linkedin
Share on email

RELATED POSTS

Exploring the Benefits, Risks and Ethical Concerns

AI in the Porn Industry: Exploring the Benefits, Risks and Ethical Concerns

According to research conducted by the Bedbible research center, as of 2023, the global porn industry makes US$100 billion a year. Pornography is so popular that around 25% of all internet searches made today are related to it. One reason behind its popularity is its ability to adapt to changing technologies, from releasing teledildonics (Bluetooth-enabled sex toys) to opening up sex clubs in the metaverse.

Why Male Birth Control Is So Hard to Create

Here’s Why Male Birth Control Is So Hard to Create

Despite significant strides in gender equality, the onus of preventing pregnancy disproportionately falls on women. As such, women have long relied on various birth control technologies, including contraceptive pills, intrauterine devices (IUDs) and vaginal gels to minimize the chances of unwanted pregnancies.

What Is the Sunk-Cost Fallacy and How to Avoid It

What Is the Sunk-Cost Fallacy and How to Avoid It

Sunk cost fallacy refers to a situation where an irrecoverable expense (“sunk cost”) has been made and is used as a justification to continue that endeavor, no matter how futile it may be. Almost all of us have made irrecoverable expenses in our day-to-day lives, like buying tickets to a film or a concert.

How News Affects the Stock Market

How News Affects the Stock Market

In January this year, the U.S.-based Hindenburg Research released a report accusing the Indian conglomerate Adani Group of stock manipulation and accounting fraud. The report received widespread media coverage, causing Adani’s stock prices to plummet. The founder and chairman of the Adani Group, Gautam Adani, lost US$34 million of his net worth in just a week after the report was released.

Indian Inventions You Probably Never Knew About

Indian Inventions You Probably Never Knew About

As home to one of the oldest civilizations in the world, India has contributed tremendously to the technological development of the world. Some of the most important inventions that originated in ancient India are the concept of the number “zero”, the game of chess and even the first known accounts of plastic surgery.

The Top 5 Biggest Flops of Shockvertising

The Top 5 Biggest Flops of Shockvertising

Shockvertising (shock+ advertising) is a tactic where an advertiser uses taboo subjects or provocative themes to incite a strong public reaction. This tactic has been known to be quite successful in raising awareness and encouraging behavioral change surrounding acquired immunodeficiency syndrome (AIDS) and human immunodeficiency virus (HIV).