Bitcoin Infrastructure Bill Engage – Bitcoin Magazine: Bitcoin News, Articles, Charts, and Guides

Authored August 3, 2021

In recent days, draft language in the proposed infrastructure bill raised a flurry of concerns for the Bitcoin community and the larger digital asset space. Congress proposed heightened reporting requirements for “brokers” of digital assets. The current draft bill broadly defines “digital assets” as “any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology.” The bill further defines a broker of digital assets as “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.” Prominent Bitcoin community members raised concerns that this definition of “broker” is broad enough to encompass miners, node operations, and hardware wallet manufacturers. If that is the case, compliance with the new reporting obligations would be effectively impossible.

Notably, the draft legislation did not redefine or alter how Bitcoin and other digital assets are treated for tax purposes. The stated purpose of the legislation is to capture revenue from underreporting of taxable events. Legislators seek to impose mandatory reporting obligations on exchanges that lessen the administrative burden on the IRS., as it enforces the existing tax code. A spokesman for U.S. Senator Rob Portman (R.-OH) explained, “[t]his legislative language does not redefine digital assets or cryptocurrency as a ‘security’ for tax purposes, impugn on the privacy of individual crypto holders or force non-brokers, such as software developers and crypto miners, to comply with IRS reporting obligations. It simply clarifies that any person or entity acting as a broker by facilitating trades for clients and receiving cash must comply with a standard information reporting obligation.”