Get the weekly summary of crypto market analysis, news, and forecasts! This Week’s Summary The crypto market ends the week at a total market capitalization of $2,17 trillion. Bitcoin continues to trade at around $62,300. Ethereum experiences no changes and stagnates at around $2,400. XRP is down by 2%, Solana by 1%, and Dogecoin by 3%. Almost all altcoins are trading in the red, with very few exceptions. The DeFi sector decreased the total value of protocols (TVL) to around…
The US Infrastructure Bill: Why Is It Bad For Crypto?
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The infrastructure bill is a US senate proposed bill that aims to spend over $1.2 trillion developing infrastructure. This bipartisan $1 trillion infrastructure bill results from the years of hard work to improve the American infrastructure systems.
It includes lump sum spending on developing roads, rails, power, environment, drinking water, airports, and many more. The main issue with this trillion-dollar bill is the way to fund the projects.
In a 2700 page document, the infrastructure bill contains new regulations that will tax and collect around $28 billion revenue from crypto as part of the funding for the bill. This bill has not been received well by the crypto community. Why?
Taxing and Reporting Requirements for Crypto ‘BROKERS’
The bill mentions that crypto brokers will be subject to tax reporting requirements. Furthermore, the projects will report any account that has transactions of $10k or over.
A crypto broker is any person or organization continually providing crypto, related services or completing transfers of digital assets in the bill. However, the scope of the term ‘BROKER’ is large, including miners, validators, developers, software and hardware creators, and many more.
Crypto lawyers and enthusiasts have been seeking ways of reducing the scope in a mission to save crypto. Due to the efforts of crypto enthusiasts, two amendments were introduced by two sets of senators to reduce the scope of the word broker. Let’s look at the two proposed amendments and what their impact would be on US crypto projects.
Amendment One
A group of senators, including Cynthia Lummis, Pat Toomey, and Ron Wayden, introduced this amendment on 4th August 2021, which aimed to narrow the scope of the word broker. This first amendment excludes many types of crypto and non-crypto service providers in the new broker definition.
Therefore, miners, network developers, software and hardware designers, validators, and non-financial entities are not brokers. What impact would this amendment have on crypto?
Generally, this amendment recognizes entities that do not have customers in the crypto world as free from the regulation. Therefore, such entities will not collect or report information since they do not have trading customers.
This amendment will mean that crypto exchanges will report their information. Crypto exchanges have loads of customers who continue trading through them daily. Therefore, the trading platforms are capable of reporting the information.
Amendment Two
The second amendment was introduced later by another group of senators, including Portman and Warner. This amendment barely reduces the scope of the word broker, only excluding proof of work miners. Currently, several blockchains use proof of work systems, like Bitcoin. Therefore bitcoin miners and mining rigs will be exempt from the new tax bill.
Generally, this amendment means POS staking platforms, validators, software creators, and project developers are all crypto brokers. Even though they do not have customers, they will have to report. Most upcoming blockchains prefer using proof of stake systems since it’s more environmentally friendly.
If the second amendment passes, network validators in platforms like Cardano, Ethereum 2, Polkadot, and many more will need to report for tax purposes. In addition, developers, software, and hardware creators will also be required to report.
Crypto Community Prefers the 1st Amendment Option.
Crypto enthusiasts and legal teams have endorsed the first amendment option over the second option. Why? The first amendment option vastly reduces the scope of the word broker. Instead, it focuses on trading platforms and crypto exchanges.
However, the crypto enthusiasts don’t approve of the original bill or with the second amendment option. So Crypto enthusiasts have been on a campaign, telling crypto users to call their senators and inform them to ‘Vote Yes for the first amendment and No for the second amendment.’
Why are crypto enthusiasts infuriated with this amendment option? Here are two main reasons;
Could Force Crypto Developers and Enthusiasts Out of US
This second option could be detrimental and could be far much more costly than productive. Passing this second amendment could make the government lose instead of gaining because developers, miners, validators, and many more crypto services providers could move away from the US.
Poloniex is one of the exchanges that in late 2019 chose to close its shops in the US and restructure providing services to other countries. Therefore, by approving the bill without the 1st amendment, more crypto service providers could close their businesses.
The crypto community is currently vastly enraged by this bill, and especially the 2nd amendment option. Jack Dorsey, Twitter CEO, joined in the quest by crypto enthusiasts stating that forcing developers, software creators, etc., could send the developers outside the US.
It’s A Consumer Privacy Issues
The requirements of collecting and reporting user information is an issue that goes against consumer privacy. Generally, this requirement could mean that all companies, even those lightly connected to crypto, will be mandated to collect users’ details, including the name, transactions, address, and many other details.
Many investors use crypto for privacy, but this bill completely goes against the fundamentals of privacy in crypto. Even developers and software designers connected to crypto could be required to collect information about the details of their dealings.
Final Word
The United States is one of the largest crypto services consumers globally. However, for years, there have been attempts by the regulatory authorities to control the crypto world by increasing the regulatory scope. The section in the infrastructure bill is one of the attempts to reduce the circulation of crypto or have control over the crypto space.
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Especially infuriating is the reporting bill, which would force many non-crypto entities to collect data, and others who don’t work with customers to leave the US. This bill will cause more losses than benefits for the US, including the revenue they anticipate getting. However, although there could be a court fight between crypto lawyers and the governments, hopefully, the regulatory environments will be more crypto-friendly.
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