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Bitcoin, Cryptocurrency, Featured

Fight for Crypto Tax Reporting, Revision of Definitions in Senate

Focussing on a slim section of the USD 1 trillion infrastructure bill created quite a ripple within the crypto community, worldwide. It happened last month when the Senate debated the $1 trillion infrastructure measure. The only substantial outcome of the whole affaire may be put down as: The cryptocurrency sector making its presence felt in the Senate.

Definition, Crypto Tax, and the Debate

The fight was up against the vague and controversial language that turns into a potential setback in the crypto tax reporting. The 2,700-page document consisted of a small segment that attempted to modify the language that erroneously circumscribed entities and events pertaining to crypto operations and thereby taxation.

At the vertex of the matter lay the definition of a crypto “broker”. The originally scripted language defines the entity in a way, so ambiguous, that it would eclipse anyone involved in the crypto transactions to be classified as a “broker”.

An attempt was made to propose an edit to the description to what is deemed adequate by a majority in the industry. This was thwarted by the majority of the White House supporting a stricter imposition on the crypto.

Related: Blockchain as Government’s Ally in Driving Tax Compliance

Crypto Tax and Treasury Role

Tax and Policy Experts, however, point in a different direction: crypto tax reporting was a proposal that would have funded less than 3 percent of the public works bill. However, things would take a different turn, if the Treasury Department already possesses the authority to demand reports for key players in the crypto industry whether or not Congress passes new legislation.

The Treasure has apparently been working since 2014 on the guidelines and requirements for reporting. The treasury dictates that crypto brokers, similar to stock or commodity brokers, must file Form 1099s to their customers and the IRS. it demanded reporting by crypto brokers, centralized exchanges, and any entity that qualify as an intermediary between cryptocurrency buyers and sellers

The infrastructure bill, again, demanded transaction reporting from any entity that provides “services” to the crypto industry. This strings a chain of industries like Software/Hardware developers and Miners who clearly provide services to the crypto industry without any involvement in transactions. 

The main architect of the effort, Sen. Rob Portman took to the Senate floor and expressed his intent to only require transaction reporting from the crypto “brokers”. The very term, “brokers”, has been broadly defined on which an amendment was proposed and declined.

In the play, it is quite clear that both the Treasury Department and the Senate are chasing the same goal towards a higher revenue.

Also Read: El Salvador Announces BTC Tax Exemption by the Government for Foreign Investors

Where does It Stand?

While it spells disappointment for the greater part of the crypto-sphere, many consider the effort a success in the long-term view. The optimists argue that it may be seen as a “success” to have made it up to the Senate floor at a still nascent stage. 

However, repeated and consistent attempts at regulating and taxing the sector may result in asphyxiating the innovation potential of the cryptocurrency; thereby leading to the death of a revolutionary invention of the millennium.

Sen. Lummis, who was reported early this year, to have been the only one in the Senate to own Bitcoins had taken her appeal to Twitter: 

“We NEED you,” tweeted Lummis. “Pls call your Senators. Pls tweet. Pls email. We are facing major headwinds on the Wyden-Lummis-Toomey amendment. Burying financial innovation in red tape & sending devs + miners on info collection wild goose chases for info they don’t know is horrible policy.”

Also Read: Ukraine Legalizes Cryptocurrency Accelerating Crypto Trade

Finally

The crypto-sphere would put up a fight, nevertheless. Reps. Tom Emmer, R-Minn., Darren Soto, D-Fla., David Schweikert, R-Ariz., and Bill Foster, D-Ill. – co-chairs of the Blockchain Caucus – have issued a letter to each member of the House urging them to “fix the crypto pay-for.”

“Crypto tax reporting is important, but it must be done correctly,” read the letter. “When the Infrastructure Investment and Jobs Act comes to the House, we must prioritize amending this language to clearly exempt noncustodial blockchain intermediaries and ensure that civil liberties are protected.”

Also, given that the laws do not come into effect until 2023, and a lot may happen in the interim period, gives optimists an eternity to hope and build for.

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