I wrote a little bit about this before, but I want to revisit it because it is a very big deal and is not showing up in the news as much as it should. I took the title of this blog from a Forbes article that came out yesterday on the upcoming infrastructure deal in Washington, but I used it ironically because there is no panic out there and, in fact, my crypto portfolio is at a three-month high. The article does hit on a point though, there should be some real questions being asked.
Ok, so what are those questions and why are we asking them? Well, this all pertains to the 1.7 trillion-dollar infrastructure package that will be passed by Congress fairly soon. I say it will be passed because this is touted as bipartisan, which means both parties are at least partially on board and that is enough to get it through. Buried in this bill is a tax on crypto that will help pay for the bill. The Forbes article talked about a draft of the bill:
"The provision includes updating the definition of broker to reflect the realities of how digital assets are acquired and traded," the document said. "The provision further makes clear that broker-to-broker reporting applies to all transfers of covered securities within the meaning of section 6045(g)(3), including digital assets."
Jake Chervinsky, a lawyer that focuses on cryptocurrency, had this to say later in the article:
"it defies logic to adopt a regulation for which compliance is literally impossible, unless the goal is to kill the industry," and "this could mean a de facto ban on [crypto] mining in the USA."
Now, this may seem a little doom and gloom, but, this is where questions need to be asked. The first question is why is this even in an infrastructure bill? What does crypto have to do with roads and trains? Ok, that was two questions.
Next, if you say, "Sure, this is all about infrastructure" then is it really about paying for roads? Let’s take a look at the numbers. The bill is 1.7 trillion (that looks like this: 1,700,000,000,000) and the tax is expected to raise 28 billion (that looks like this: 28,000,000,000.) Big numbers, but, when we divide the revenue by the cost, we see that this is not about paying for the bill. The new tax would pay for about 1 percent of the cost. Remember, you are talking about a government that has run up their debt by about 5 trillion in 2020 alone with no thought to paying for it and now all of the sudden they need to tax crypto for revenue???
I will say, I have never been for crypto being used to avoid taxes. If your crypto is converted to fiat at a profit, you should pay tax at your current rate. That is how the laws work. I do not think this is about taxes, though. If it truly is, then congress should address the issue in a bill specific to crypto. This is about control and laying the groundwork for Washington to be able to keep their foot on the crypto world with a backdoor rule in an infrastructure deal. That is not how regulation should take place.
(Side note. Don’t forget, almost all infrastructure in the US is either privately held or owned by the states. While the federal government may regulate, they don’t own it. So, this is all the more reason to take note of what is happening.)
I’ll close with this. Crypto was created to be outside of all these governmental controls. When this passes, it will be a big test for these new currencies. Will this push everything offshore? What will be the outcome if this is an attempt to ban crypto? Well, I have no idea, just questions. If I figure it out, I’ll post again.
Thanks for dropping by. I’ll leave with you with this ominous quote that I almost used for the title: