Home Regulations Congress Thinks Cryptocurrency Is Full Of Tax Evaders

Congress Thinks Cryptocurrency Is Full Of Tax Evaders

cryptocurrency tax evaders

Jake Chervinsky:  What does crypto have to do with infrastructure, you may ask? The bill has to include “pay-for” provisions to raise revenue for new spending so that it’s revenue-neutral as a whole. The “broker” definition is one of the pay-for provisions in the Senate draft of the bill.

There are three main ways to raise revenue in a bill like this: increase current taxes, add new taxes, or improve tax compliance. This allegedly falls in the third category—making people pay taxes they already owe. Congress thinks crypto is full of tax evaders. (It isn’t.)

The infrastructure bill is estimated to cost > $1 trillion. Congress scored the new “broker” definition at $28b in added tax revenue. I have no clue how they got this number, or how it’s even possible to calculate. Regardless, this is no way to handle major new regulations.

This is a deeply misguided provision that, if adopted, will do far more harm than good to US interests. I’ll give you my top five reasons why. First, it defies logic to adopt a regulation for which compliance is literally impossible, unless the goal is to kill the industry.

Second, it’ll be a huge foreign policy failure. After China made the geopolitical blunder of forcing miners out of their country, many of us hoped the US would take market share in this crucial sector. We can’t make the same mistake China did. We have to stay in the game.

Third, it won’t work. For every new dollar of tax revenue, we’ll lose two (or ten) as the US crypto industry shuts down or goes offshore. And instead of getting more insight into taxable crypto gains, the IRS will get less, as more users “go dark” on unregulated platforms.

Fourth, it short-circuits the discussion we’ve been having with FinCEN. Since President Biden took office, FinCEN has done a ton of solid work on crypto AML regulation. We should keep that process going, not cut it off by sneaking KYC in through the Tax Code’s back door.

Fifth, the burden it’ll place on civil rights is unacceptable. Our 4A right to privacy limits how much surveillance government can mandate without a warrant, & in a post-SolarWinds world, the last thing we need to do is expose more sensitive information to a security breach.

So, what can we do? To start, don’t panic. This provision isn’t final yet & still can be changed. Even if it passes as-is, it shouldn’t take effect until 2023 at earliest, so at least we’ll have time to try to undo it, in Congress or the courts. This may be a long fight.

If you’re a US citizen, call your Members of Congress, especially Sen. Portman if you’re in Ohio. If anyone says “this won’t help” after we held off FinCEN & the FATF, I’ll lose my mind!

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James

James T, a passionate crypto journalist from South Africa, explores Litecoin, Dash, & Bitcoin intricacies. Loves sharing insights. Enjoy his work? Donate to support! Dash: XrD3ZdZAebm988BfHr1vqZZu6amSGuKR5F

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