New regulatory shocks in the crypto market! The U.S. congress has passed the infrastructure bill – including the tightening of tax filing requirements for crypto participants. The crypto tax bill will take effect when the U.S. President Joe Biden signed it.
Why does the new infrastructure bill include crypto-related measures? The government plans to change the tax reporting requirements on cryptocurrency trading. Thereby, this would add taxation revenue to support infrastructure investments.
The U.S. House of Representatives passed a $1.2 trillion infrastructure bill involving the cryptocurrency industry. If U.S. President Biden signs it, the bill will make it mandatory for citizens and companies to comply with the new reporting standards. It requires crypto transactions worth more than $10,000 to be reported to the U.S. Internal Revenue Service (IRS).
Companies handling digital assets with a value of more than $10,000 will need to declare transaction details. This includes the recipient’s name, address, social security number (SSN), and individual tax identification number (ITIN). Failure to declare truthfully is a felony of tax evasion.
New US Crypto Tax Bill: Killing Crypto and DeFi?
Also, the bill includes the definition of “digital asset”. The bill defines digital assets as any value that exists in digital form. They are recorded in an encrypted decentralized ledger, or any technical value designated by the U.S. government.
Moreover, the bill defines digital assets as “security”. Will this open the door to the SEC‘s jurisdiction over digital assets?
In addition, the bill defines all crypto exchanges as “brokers”, just like Fidelity, Schwab, and other traditional financial brokers.
However, because the wording in the bill is not clear enough, it could incorporate validators, node operators, decentralized application developers, and even crypto miners. As a result, these crypto market participants will have to comply with tightened reporting requirements on asset, transaction, and capital flow.
Decentralized finance (DeFi) platforms would be difficult to operate as before under the new bill. Key advantages of DeFi platforms are anonymity, no censorship, and no intermediary.
After all, the $1.2 trillion infrastructure bill can raise an additional $28 billion from taxing crypto.
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