Crypto Industry Faces Defining Moment with New Tax Reporting Proposal

Sep 24, 2021 | Blog

The recent $1 trillion infrastructure bill includes a reporting proposal regarding cryptocurrency. This has led to significant lobbying from the crypto industry. Our cryptocurrency tax attorneys can explain this in more detail, but it is safe to say that the reporting proposal has essentially put this type of transaction on the map in Washington.

Crypto Industry Cites Problematic Language in Tax Bill

Those in the cryptocurrency industry wanted what they thought of as “problematic language” to be changed in the new tax-reporting requirements outlined in the Senate version of the aforementioned bill. However, they are still hopeful that House legislators can address their concerns. Part of their optimism is due to the heavy support the industry has gotten from citizens who urged their senators to change the language in the bill.

Proponents of the crypto industry say that the Senate version of the bill has vague language and, among other things, does not clearly define the role of a broker. In addition, they claim the bill would require software developers to report transaction data for tax purposes, but that this would be difficult or impossible because most don’t have the necessary client information to complete this task. Industry advocates claim this will lead certain businesses to work outside of the United States or operate in a gray area. A crypto-tax lawyer might say that these new regulations in the Senate bill are a wake-up call for the industry.

Although the Treasury Department could more narrowly define the term “broker,” many in the industry still fear that the other nebulous terms and phrases will leave too much up to interpretation from one administration to the next. Advocates for the cryptocurrency industry claim they are not against proper taxation, provided there is guidance about reporting. It is simply that they believe the current language of the bill is not hitting the mark.

Cryptocurrency No Longer Viewed as a Hobbyist Industry

“Fight for the Future,” a digital-rights organization, reported over 40,000 calls to senators before the Senate voted on the infrastructure bill. The organization’s director, Evan Greer, called this inflow of calls one of the biggest outpourings of grassroots energy he has ever seen, adding that some senators even called the Fight for the Future’s office to see what it was all about when they began receiving such a high volume of calls.

The bill is now in the House, and bipartisan leaders of the Blockchain Caucus are currently discussing how to move ahead with the infrastructure package. Representative Darren Soto (D-FL) stated that he would introduce two bills through the reconciliation process proposing amendments that would ultimately alter the definition of a broker. Soto also said that the attention the cryptocurrency provision has been getting in Congress is evidence of how far the industry has come.

Many cryptocurrency lawyers would agree that, in the past, the crypto industry was not taken seriously and that crypto was nothing more than a speculative asset. All this has changed now, and the mention of it in the bill will likely show how important such technology will be in the economic future of the country and the world. A tax attorney in San Francisco can offer more details about the new cryptocurrency and tax guidelines.