The US Infrastructure bill has caused chaos in the Crypto space this week. Why is that?
The infrastructure bill is focused on tackling the issue of building roads, bridges, transportation systems, and clean energy, etc. that the US has been neglecting for decades.
In order to fund the program the infrastructure bill proposed ways to raise $28 Billion of the $1 Trillion through taxes related to cryptocurrency and DeFi in particular. The bill proposes brokerage tax on certain individuals, however, the bill's definition of the word "broker" is causing hangups around how they are using it to define certain parties in the crypto space.
For the sake of this bill: the term "Broker" is defined as anyone “responsible for and regularly providing any service effectuating transfers of digital assets on behalf of another person.” Anyone identifying as a "Broker" in this sense would need to gather KYC (know your customer) for every single transaction they helped facilitate in order to fill out a 1099 form.
Kind of defeating the purpose of Cryptocurrency in a way, and since blockchains work by verifying transactions over and over.
This language informs anyone who isn't just buying and selling crypto has to gather KYC info - yes, including miners. But since miners are just confirming transactions on the blockchain (transactions which do not have identification info in them), this info is impossible to access. This would make it impossible to report to the IRS which means the IRS can shut you down, ergo, no more mining crypto in the U.S.
However, I would argue that this would be relatively unenforceable in practice...
An amendment to the definition of broker was proposed by Senators Cynthia Lummis, Ron Wyden, and Pat Toomey which excluded miners, software designers and protocol developers from having to report their activity.
A second amendment was proposed by Mark Warner, Rob Portman, and Kyrsten Sinema, but this one only excluded PoW miners from the definition of "Broker" and not PoS miners.
Both of the amendments were blocked because the Senate did not reach a fully unanimous vote. The only senator who blocked it was Sen. Richard Shelby. This man receives most of his campaign donations from large banks and financial institutions.
So, how do we proceed?
First off, this isn't the end of Crypto as we know it and the bill is far from becoming law.
According to this article, "The provision in this bill is more to establish Congress’ intent, rather than lay out specific rules. 'This bill will probably be the first step of further regulation of cryptocurrency,' Anjali Jariwala (certified financial planner, certified public accountant and founder of Fit Advisors) says. If passed, lawmakers will discuss the regulation before it becomes a law, she says."
She continues with, “I don’t see how an industry as big as crypto could continue to operate without any regulation or oversight. If people want crypto to become more of a mainstream asset, then I think this is a necessary first step in the process of becoming more ingrained in mainstream financial services.”
We are not doomed, don't let the FUD influence you in that way but it is a step in the wrong direction that we will have to work at undoing.
Whether we like it or not, the U.S. government will always try to put as much regulations on crypto as possible. They're not going to give up economic power any time soon and cryptocurrencies are a huge threat to this country's financial status quo.
Regulation is a step towards mainstream use and acceptance and if anything, every bit of attempted regulation is just proof that crypto is not going anywhere.