Infrastructure trading puts cryptocurrencies on the Washington cross

Washington — Looking for Funds to Support Senate Payments Bipartisan infrastructure package, Parliamentarians are looking to the cryptocurrency industry as a potential source of tax revenue and are proposing a stricter scrutiny of digital transactions.

Offering packages will require crypto brokers and investors to provide the Internal Revenue Service with more disclosure about their transactions. The aim is to bring more transparency to the opaque sector, which critics claim is a paradise for money laundering and tax evasion. However, this provision also emphasizes recognition in Washington. $ 2 trillion industry stays here And it offers new opportunities to generate federal tax revenue.

By strengthening tax enforcement on such digital assets, the federal government will be able to raise $ 28 billion over a decade, according to estimates by the Joint Taxation Commission, which analyzed the plan. That’s just part of the $ 550 billion that MPs have proposed for new federal spending on infrastructure, Some fresh sources of income Included in the plan.

The possibility of more federal scrutiny of crypto transactions has been nervous in the early financial technology industry, which has so far escaped the rigorous scrutiny that applies to traditional financial services.

Owen Tedford, an analyst at Beacon Policy Advisors, said in a note to clients on Friday, “It’s not yet clear which regulation comes from which agency, but there’s no mistake. The regulation applies to the industry.” increase. “Parliamentarians and regulators take cryptocurrency concerns seriously and appear ready to make lasting efforts on multiple fronts to remove them from the shadows.”

Earlier this year, the Biden administration outlined various policy priorities and how they could be used to make money, including putting the crypto industry under more IRS surveillance. .. The government initially proposed requirements for reporting cryptocurrency transactions as part of a broader initiative to close the so-called $ 7 trillion tax gap.

However, the Treasury’s plan included additional funding to help the IRS crack down on tax evasion — money not included in the Senate infrastructure package. It can make it more difficult for already tied institutions to crack down on the tech industry that has developed almost overnight.

The Senate draft, obtained by the New York Times, has a broader wording than the Treasury’s proposal. Government plans apply new reporting requirements when taxpayers buy crypto assets from one broker and transfer them to another broker. It also applies to companies that receive crypto assets worth more than $ 10,000. The Treasury estimates that the proposal will generate a “negligible” amount of income.

The Senate bill, which is still subject to change, proposes similar reporting requirements, but includes a broader definition of cryptocurrency brokers, meaning those who facilitate the transfer of digital assets. ..

Some cryptocurrency brokers have already reported their transactions to the IRS, but most have not, due to the ambiguity of existing legislation.

The cryptocurrency industry claims it wants clarification of regulations, but some members warn that the broad definition of brokers can have unintended consequences.

Perianne Bowling, chairman of the lobbying group Digital Commerce Chamber of Commerce, said the bill was drafted too early. She argues that the very broad definition of cryptocurrency brokers could impose disclosure requirements on everyone involved in the industry, from digital money-earning “miners” to technology developers and investors. did.

Boring suggested that saddles with regulations that may not comply with industry participants are likely to undermine the bill’s goals.

“This can have a significant impact on the development of some of the most important areas of innovation, or it can kill parts of the industry or drive it abroad,” she says. I did. “We should adopt this technology and not regulate its non-existence.”

Drew Nirenberg, a spokesman for Ohio Republican Senator Rob Portman, who helped draft the bill, opposed the idea that the proposed rules would hurt the industry.

“This legislative language redefines digital assets or cryptocurrencies as tax’security’, violates the privacy of individual crypto holders, and requires IRS reporting to non-brokers such as software developers and crypto miners. We don’t force you to comply, “he says. Said. “It simply makes it clear that an individual or entity acting as a broker by facilitating a customer’s transaction and receiving cash must comply with standard information reporting obligations.”

Cryptocurrency companies are patrolling the industry as regulators Stock up on expensive lobbyists To help shape future rules.

This week, Massachusetts Democratic Senator Elizabeth Warren sent a letter to Treasury Secretary Janet L. Yeren, mobilizing her financial stability oversight committee to say, “Cryptocurrency is the financial system.” Warren told the bank. We are particularly concerned about the threat posed and the increased exposure to cryptocurrencies in investment vehicles such as hedge funds.

Senator Sherrod Brown, a Democrat in Ohio, issued a harsh warning about cryptocurrencies at a Senate Banking Commission hearing on Tuesday.

“There is nothing’democratic’or’transparent’ about networks that are spread in the shade of funny money online,” Brown said. “After 10 years of experience with these technologies, it’s no exaggeration to say that the majority weren’t good for anyone but their creators.”

This month, major US financial regulators met to discuss the rapid rise in popularity of stablecoin and asset-backed digital currencies, the struggles the government is struggling to catch up with, and the risks they pose. Financial system and national security.

Introducing new reporting requirements for cryptocurrencies is not easy and it is not clear that they will increase the amount of income expected by lawmakers. Such calculations are difficult because joint taxation committees or other organizations need to calculate based on estimates of the size of the industry.

Eric Hilton, a former executive director of international operations for the IRS Crime Investigation Division, said more light on the world of cryptocurrencies would still be of great help in reducing the tax gap.

“The insights are useful for individuals who are trying to hide their income,” Hilton said. “I think it will be a big win for everyone in the tax ecosystem.”

Infrastructure trading puts cryptocurrencies on the Washington cross

Source link Infrastructure trading puts cryptocurrencies on the Washington cross

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