New Bitcoin Tax Plan Stifles Blockchain Technology

After a fierce debate exploded over how to tax cryptocurrency, a bid to pass a major infrastructure bill worth approximately $1 trillion has stalled in the senate of the United States. 

The continuous efforts to pass an amphibian infrastructure bill could reshape the dimensions of the cryptocurrency world, as lawmakers exchange views about new tax reporting requirements on several parts of the blockchain system. 

The Washington Post reported last Friday that Treasury Secretary Janet Yellen lobbied the lawmakers directly to keep cryptocurrency tax provisions stronger in the infrastructure bill. It depicts the dedication of the White House to bring cryptocurrency into the extensive tax reporting systems even when the details about the new requirements jeopardise disrupting the fragile infrastructure plan’s political balance.      

A New Requirement on Crypto Brokers

The initial tax bill released on Saturday imposed a broad new requirement on crypto brokers to report transactions as part of their tax returns, similar to the enduring requirements for trading conventional assets. The vague definition of “broker” in the original text suggests extending to wallet miners and developers.  

An amendment from Cynthia Lummis,  Pat Toomey, and Sens. Ron Wyden would release miners from any reporting requirements explicitly, but the amendment has not passed yet. A group of lawmakers led by Sen. Mark Warner (D-VA) has proposed a slightly gruffer compromise that left several cryptocurrency advocates uncomfortable and has attained more support in congress. Advocates are concerned that the varying reporting requirements in the Warner amendment could pave the way to a lasting split among various blockchain technologies.

A ‘Cold Impact’ on Cryptocurrency 

Just as stockbrokers report their customers' sales to the internal revenue service (IRS), the bill will raise approximately $28 billion over the next decade by updating IRS requirements for the crypto brokers.  Pat Toomey, the Republican senator, is concerned, along with other senators, that software developers, crypto miners, and other relevant people would be contingent on the new IRS reporting requirement.

Toomey said that we would be doing a lot of damage if not acquiring this amendment. He also said that we could harm the development of this technology, and I am very concerned about it. 

Meanwhile, the White House claimed that the compromised amendment would reduce tax circumvention in the cryptocurrency market. The administrations believe this provision will extend tax compliance in this evolving finance area and ensure that high-income taxpayers present what they owe under the law.