Biden's Infrastructure Bill Shouldn't Undermine Cryptocurrency Infrastructure In The Process

from the that-would-be-a-mistake dept

There was a reasonable uproar from the cryptocurrency community this weekend as it appeared that the long fought for Biden infrastructure bill would change some definitions to create a mess for the wider cryptocurrency space.

Language in the bill would require crypto brokers to report customer information to the Internal Revenue Service. More importantly, over the weekend it broadened the definition of what?s considered a ?broker? to anyone ?responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person? which doesn?t exclude miners, software developers, stakers and other individuals in the crypto economy who don?t have customers.

?The language gives a lot of power to define what should be included in the reporting requirement,? Oppenheimer analyst Owen Lau. ?It says any person who is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person ? which can mean anything. If I transfer bitcoin for you, then it can mean I become a broker.?

The potential for mischief was certainly quite high:

The proposed legislation, if passed, would have a significant impact on both investors and exchanges. Exchanges will need to undertake significant efforts to comply with the reporting regime. Investors, on the other hand, won?t have to ?do? anything. But under the new law, all of the information that the IRS would normally receive when an investor sells a share of Amazon stock will now be sent to the IRS when an investor sells one Bitcoin, one Ethereum, or the like. There?s a lot to be sorted out: what will happen with crypto stored in cold storage, wallets not on exchanges, so-called ?self custody.? The proposed legislation does not address this ?self-custody? cryptocurrency, because it is analogous to cash under a mattress. It is difficult to trace and even more difficult to devise an information reporting scheme that would encompass such an asset. Individual cryptocurrency owners and investors must still pay attention, however, because it is even more likely that the IRS will be made aware of their transactions and expect them to be reported on a tax return.

Lots of folks began to notice some problems with this, including Senator Wyden, who noted it was yet another example of politicians not understanding technology:

Others in the Senate spoke up about problems with the language as well, and it appears that some last minute changes are being made in response:

The final legislative text included some changes to alleviate concerns of the cryptocurrency industry, which expressed alarm last week about new requirements that would define most of the participants in the sector as brokers and force them to turn over information to the I.R.S. The provision was projected to raise $28 billion over a decade.

After receiving pushback from cryptocurrency lobbyists, lawmakers revised that section of the bill to ?clarify? the definition of a broker rather than expand upon it.

The legislation also removed language that explicitly targeted ?any decentralized exchange or peer-to-peer marketplace.? It replaced that with a broader definition that characterizes brokers as anyone ?responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.?

There’s an important balance here. Obviously, some aspects of cryptocurrency are used to hide money transfers, or to otherwise engage in scammy or illegal behavior. So you can understand the interest in better, more accurate reporting. But, treating cryptocurrency the same as other currencies also will have profound downstream effects, at a time when cryptocurrency still represents a key hope for bringing back the kind of internet we were once promised — one that is more decentralized, and where more of the power is pushed out to the ends of the network, rather than controlled by a few large central players.

While I get that some people are hugely skeptical of the entirety of the cryptocurrency space, there’s a real risk of destroying the vast potential to build a better internet if we focus just on the scams and the illegal uses. Thoughtful regulations around cryptocurrency have to recognize what it actually entails — and the initial version of the infrastructure bill seemed to do the opposite. And that would be unfortunate, seeing as how getting cryptocurrency right can help reinvigorate the very important internet infrastructure.

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Comments on “Biden's Infrastructure Bill Shouldn't Undermine Cryptocurrency Infrastructure In The Process”

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46 Comments
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PaulT (profile) says:

I can understand what the aim is here, but I can’t even begin to imagine how this would operate in the real world. Unless you’re providing a service that trades into fiat currency, there’s no need to provide any real life identifying information. Which means that nobody will know if the person is in the US or not. Which, surely means that it’s impossible to comply with this without everybody in the world who deals in crypto being required to provide personal information to the US government, no matter where they are actually based. I don’t see that demand going well.

oneany says:

Re: How this would operate in real world ?

You are not alone — no Congressperson understands how this would actually work, but that’s standard practice for their legislating.

“The language gives a lot of power to define what should be included in the reporting requirement”

yeah it gives a lot power that does not legally exist in the Constitution for Congress to ‘give’ to anybody.

but that issue was settled long ago in Federal practice — Congressional law-imagineers can legislate anything they want, without any serious legal restraints. The sky’s the limit on political dictates.

Most people love these vague limits on Federal power because it gets them favors, economic/social policy, wars, and goodies they like.
But on issues they don’t like (such as the topic here) they are suddenly very concerned about Feds doing stuff the Feds should not do.
Most people are clueless about the actual American process of governing.

Anonymous Coward says:

Best case scenario you get another situation like Dennis Hastert working to pass the PATRIOT Act. The bank began to investigate payments based on the new legislation against structuring deposits, which ended up being hush money he was paying to victims he molested. When the bank called to inquire he informed them "that law is for terrorists" and hung up the phone.

Worst case you just end with law enforcement starting civil forfeiture proceedings on anyone with over $10k in cryoto (and if they don’t speak English the total amount needed to coerce you to sign something goes down).

I don’t think we should risk the 99.99% chance of option B happening for the longshot option A.

This comment has been deemed insightful by the community.
Bloof (profile) says:

The crytospace is already a mess of pump and dump scams, crap like Tether and exchanges that suddenly need to go offline for maintainance every time there’s a sell off, and that’s without the MASSIVE energy use to produce gambling tokens that affects each and every human on this planet because of the vast amount of energy the system uses and all the E-waste it generates just to produce gambling tokens. The world has sprouted another first world nation’s worth of energy consumption just so libertarian techbros can scam oneanother with magic beans and rip off grandmas while pretending it’s all about the technology, you know, that slow database that virtually every attempt at using for things in real world has shown to be worse than the systems already in place.

Burn the whole thing to the ground.

PaulT (profile) says:

Re: Re:

Opinion noted, but your anger might subside a little bit if you read about the actual real-world applications of crypto, especially in third world countries. The gambling strawman doesn’t really help the guy buying groceries in Venezuela that he can’t afford with the local currency through normal means.

There’s problems for sure and maybe there’s better ways to deal with global economic situations, but you won’t get very far convincing people when you misrepresent the entire system and ignore the many things that don’t fit that particular narrative.

Bloof (profile) says:

Re: Re: Re:

Any benefit to the third world is a figleaf for greed, so is no more wirth mentioning than the charitable outreach of companies like ExxonMobil or BP.

You cam find other ways to transfer money to developing nations, you can’t find another planet for those same people to live on once this one has been broken beyond all hope of repair by people burning through so much energy they have to bring fossil fuel plants out of mothballs so they can keep on mining Chuck-E-Cheese tokens in the hopes of becoming millionaires because some other sucker bought in after them.

Mike Masnick (profile) says:

Re: Re: Re: Re:

You’re not wrong to be concerned about the environmental impact and the pump-and-dump greedy scammers. But you’re throwing out a ton of good stuff with the "burn it all to the ground" idea. There are real efforts underway to deal with the environmental issues, which will hopefully help significantly. Already there are cryptocurrencies out there that aren’t so environmentally wasteful.

And beyond the benefits that Paul talked about, you’re also missing out on the most real opportunity we have to build a better internet that isn’t just controlled by a few internet giants, where control is really more distributed to the ends of the network, rather than the middle. Don’t let the very real negatives eat up the very real positives as well. Focus on how we deal with those negatives, while still obtaining the potential benefits.

Anonymous Coward says:

Re: Re: Re:2 Re:

Ah yes, the environmental issues will be solved soon, right?

This is liberalism at its finest- a reformist attitude that thinks if we can just fix the worst problems- remove the bad apples- get some better regulatory structures in place- then the system might just work rather than internalizing that a system based on fundamentally broken, greedy, hyper-capitalist models is one that will always produce harm.

Mike Masnick (profile) says:

Re: Re: Re:3 Re:

I didn’t say all the environmental issues will be solved soon. I said that they’re being worked on — and they are. And you can rage against cryptocurrency as much as you want, but it’s not going to magically go away. So why not be a part of the fucking solution and work towards making it better, rather than just screaming about it being terrible and doing fuck all to help.

Anonymous Coward says:

Re: Re: Re:4 Re:

And you can rage against cryptocurrency as much as you want, but it’s not going to magically go away.

Neither do other scams / thefts / crimes of all kinds.

As usual, esp in "money" manipulation, YOU are simply FOR allowing criminals to operate.

So why not be a part of the fucking solution and work towards making it better, rather than just screaming about it being terrible and doing fuck all to help.

You can’t make crime "better".

Anonymous Coward says:

Re: Re: Re:4 Re:

Yeah, they aren’t magically gonna go away. But they can be banned and deligitimized to the point that private equity firms aren’t buying fossil fuel power plants to mine it and gamers will be able to buy graphics cards again. Ask the people of El Salvador if they want this bullshit pushed by their corrupt leader.

Like Everest said, cryptocurrency is a system based on fundamentally broken, greedy, and hyper-capitalist models. The idea that it or the blockchain will help lead us to a decentralized Promised Land version of the Internet, or a better world overall, is folly.

Anonymous Coward says:

Re: Re: Re:3 Re:

Ugh that characteristic deranged self proclaimed "leftist" bullcrap. You can tell because he demands unilateral control over thought and not only thinks it is not only okay to demand the complete destruction of the existing system but it is not okay to even ask the impertinent question "So what do you have in mind as an alternative and how is it better?" because it gets in the way of the "revolution". Don’t you dare point at the massive pile of bodies last time! Dissenting viewpoints are fundamentally evil even if they do more good than I ever have!

You don’t burn down your house because it has asbestos in it and then try to learn how to build a new better house before you die of exposure and you sure as fuck don’t do it to a whole goddamn city! Yet these self-righteous manchildren are bent on doing it to whole societies while possessing less self-awareness than a chat bot.

Anonymous Coward says:

Re: Re: Re:2 Re:

The problem I have with this position is the "very real negatives" are demonstrably real and we have hard data showing the negatives. The "very real positives" all seem to come up in hypothetical discussions of what-ifs and what-could-bes.

Show me a cryptocurrency with real tangible benefit with less than equivalent offsetting negatives and we can talk about how to minimize the negatives further.

This comment has been deemed insightful by the community.
Anonymous Coward says:

Re: Re: Re: Re:

Yep. Cryptocancer is bringing fossil fuel plants back online. It’s a dogshit technology that helps to kill the environment (along with ruining the PC graphics card market), and all the wealth is accumulating at the top like with every other part of our fucked-up economy. “Create pollution, earn money” is literally the stuff that various 90’s cartoons like Captain Planet and more had as storylines and it’s fucking happening right now thanks to cryptocurrencies.

Mike continuing to hold out hope for cryptocurrencies because of some vast potential (that’s utterly failed to materialize since cryptocurrency’s inception) and the fact that they’re a key linchpin in his “Protocols Not Platforms” Holy Grail is disheartening.

Anonymous Coward says:

Re: Re: Re: Re:

You cam find other ways to transfer money to developing nations

Yeah, but are they better or worse for the environment? What we’re talking about might be 10 Western Union branches per city, and some competitors, and various banks. (The USA has 80,000 bank branches across 5000 institutions, for example.) Employees and customers often drive to these places, and they take power to build and run, and then we have large skyscrapers holding headquarters, backoffices, etc.

In short, traditional financial services make up something like 5-10% of GDP, and probably use a similar percentage of our electricity and other limited resources. It’s not at all clear to me that they will, over the long term, be less environmentally harmful than cryptocurrencies.

This comment has been deemed insightful by the community.
Anonymous Coward says:

Re: Re: Re:

Any positives the Cryptocurrency community have are so miniscule compared to the real world harm, they’re a figleaf like the community outreach and environmental programs of companies like ExxonMobil and BP, so aren’t worth mentioning.

There are many ways to transfer money, but only one planet. What will the people of Venezuela and the developing work do when the environment is torched beyond all hope of repair? Will Bitcoin millionaires be lining up to help with flooding, fire and draughts they’ve helped accelerate. Of course not, no more than they’re willing to help people who’ve lost everything in the daily pump and dumps and exit scams. They’ve got theirs, that’s all that matters, right?

Anonymous Coward says:

Re: Re: Re: Re:

Exactly. The super-rich of today could help out developing nations and nations that have hit hard times by using their vast sums of wealth to build water treatment plants, green energy infrastructure and better electrical grids to go with it, massive amounts of affordable housing, and more. But they fuckin’ don’t. The people like the private-equity firm that bought the fossil fuel plant to mine Bitcoin aren’t going to do shit to help out their fellow man.

Scary Devil Monastery (profile) says:

Re: Re:

"The world has sprouted another first world nation’s worth of energy consumption just so libertarian techbros can scam oneanother with magic beans and rip off grandmas while pretending it’s all about the technology…"

At this point we just need to accept one thing first and foremost; barring the implementation of global martial law, no one will ever reduce power needs. Drink that in for a minute. If it wasn’t bitcoin mining something else would be invented to fill the capacity of GPU processing. The human exponentially increasing need for energy will remain for the foreseeable future.

We also can’t "burn it to the ground" without also burning electronic communications and the right to own and program computers to the ground. Bitcoin is one of those none-too-smart ideas you really can’t do anything about.

Hence what we truly need is to get off our asses about renewables. Solar, Wind, Water, Fusion and liquid salt reactors…we’re going to need all of it. And we’re going to need it quickly while somehow not contributing to the carbon footprint from the manufacture of all that new hardware.

Current status is already that we’re too late. Global warming is already going to hit the 2 degree mark, the greenland glaciers are going to go away and the siberian tundra is already beginning to leak the vast methane deposits required to push us ovr the brink.

Railing against bitcoin is, at this point, just ranting about the deckchair placement on the Titanic.

Scary Devil Monastery (profile) says:

Re: Which is it?

Both.

It starts with a lot of hopefuls investing their house and home in Dunning-krugerrands and ends with their investment rapidly shifting into Freddy-krugerrands and taking a taloned glove to their savings as soon as the dream turns into a nightmare. See also, "wooden nickle" and "snake oil".

Not to say that bitcoin isn’t usable for beneficial purposes, just that it’s not usually the case that it is. A bit like the medical spirits usually a major ingredient in traditional old western miracle cures.

Hope that helps, oldtimer.

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Anonymous Coward says:

"DOCTOR" Maz the Enabler Of Trickery

Your one constant, besides corporatism, is "laissez-faire" enabling of crime.

So why not be a part of the fucking solution and work towards making it better, rather than just screaming about it being terrible and doing fuck all to help.

You can’t make crime "better".

YOU want crime to PAY.

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PaulT (profile) says:

Re: An interesting day here!

It’s sad that you think this is a reasonable comment. I’m not sure if this means that they’re usually wrong about the subject or they just opted not to lie to you for once, but since you don’t give anything other than a childish attempt at gloating that doesn’t allow for further conversation, I congratulate your stopped clock on one of its 2 daily correct pronouncements. Now, on to your regular threads where you spout easily debunked lies….

PaulT (profile) says:

Re: Re: Re: An interesting day here!

I’ve read enough Breitbart in the past to know the type of skewed propaganda that typically gets written there. If you have a source article that you’re directly referring to in order to have a conversation about it, I can re-evaluate on that one story. I’m not going to search for your sources for you.

Absent that, all we have is someone who’s announced that they get most of their information filtered through a highly biased lens acting smug because other people outside of that echo chamber appear to have agreed with one of his sources for once. Well done, I suppose, but your comment doesn’t add anything to the conversation other people are having on the subject.

Lostinlodos (profile) says:

Re: Re: Re:2 An interesting day here!

Considering it was BB that the initial bill leak went to?

You can complain all you want but generally BBN is centrist in American politics, even if it’s employees are predominantly (but not en mass) conservatives.

The general liberal complaint relies on the false assumption that interviews dictate association.

They broke the Crypto story within 6 hours of breaking the bill draft. And were directly quoted by Decrypt.

https://www.breitbart.com/politics/2021/07/29/cryptocurrency-tax-threatens-to-put-bipartisan-infrastructure-bill-in-upheaval/

But that aspect was leaked, again to BBN, a week earlier.

Politicking aside:
This is something that will decimate people like me. My general moving holdings in crypto are under $5000 but my daily movement involves buying $1 in every new token and coin that pops up.
I’m one of the early ones who bought Bitcoin under $1. I have 1.1 Bitcoin and a separate source wallet coin now at .80 that I use to buy $1 worth of every new coin that hits the exchanges I use.

If this puts into place what many, including this article, are missing, taxing all movements, …

This puts into place a method that you can’t even donate or walk away from crypto without paying taxes.

Taxation was the centrepiece of the revolution.
It was one of the factors of the civil war.
It nearly caused 4 states to leave during and after the war of 1812.
Taxes lead to the collapse that caused the Great Depression. The race riot of 1936. The veteran’s revolt of 1946 over war trophies.
The Belgote affair of 1964.
The Vietnam pay docking for war trophies.
The 1983 CIA revolt.
The 1989 tech rebellion.
The 1999 dotcom implosion
The 2004 licensing rebellion
The 2009 housing bubble, partly based on new tax regulations on mortgage writ offs

Bills like this, that add taxes without actually thinking?

Here’s what’s missing from this
Article!

My 2021 filing for 2020 consisted of less than $1000 in crypto income. And required 2701 pages in reporting.
Any idea what it costs to print that many pages on a lesser printer? $107 for the toner and $55 for a case of paper. $99 for a consolidated crypto report.
And $244 to our family CPA.

This bill sets forth a method to tax non-value transfers
Convert light or lite to dark coin? Tax.
Move your interest from USDC or Tether to TDG? Tax.

To every person who agreed to this:!
I hope you get gangrene in you dick or clit. I wish a slow painful death to you. Pox Familia. Et eterna!
Reality check! Not every crypto user is upper class.
Fuck you and everyone who votes to keep you in office.

Anonymous Coward says:

Surveillance

There is that other legislation where we already collect all your information, through our partners under intelligence sharing agreements, via a rubber stamped process.

Once upon a time we actually had to go to a real life judge, and get them to rubber stamp it, after gagging them so they couldn’t say anything, using the threat of ‘national security’. That was normally for spies and their ilk, but we also applied it to anyone they associated with. The process was slow and cumbersome, requiring an overhaul for the rapidly emerging IT sector, so we automated it.

The new systems no longer requires us to climb through the window of your best friend’s house to bug the place, or tap the phone line on that street. Now we simply sniff it, know it, collect it, process it, exploit it and partner it all.

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