Senators push through bill with surprise crypto tax amendment

[Hydrogen]

In a surprise amendment to a massive bipartisan US infrastructure bill, senators have moved to collect tax on cryptocurrency – requiring transactions of more than $10,000 to be reported to the IRS.

With the amendment approved, the bill will now be presented to the House of Representatives and the US Senate where it could soon be written into law.

The new bill will focus on businesses – such as centralised exchanges (CEX) – creating a legal obligation for them to report transactions of more than $10k on their platforms to the Inland Revenue Service (IRS).

$10,000 transactions are already the standard threshold for IRS reporting requirements, so this latest proposal can be seen as an extension of the information reporting regime into the crypto space.

This follows a Treasury publication earlier in the year that suggested tax-enforcement on crypto assets were necessary in order “to minimise the incentives and opportunity to shift income out of the reporting regime”.

However, the real catalyst for this legislation has been a desperate need to fill a funding gap in the new $550 billion national infrastructure plan, which aims to modernise America’s aging transport and power grid systems.

The IRS has been examining crypto for a while. Last year it added a line about cryptocurrency to its individual tax returns.

Many leaders in the industry have already begun to push back against the new proposals, seeking to build congressional support against a policy that sees crypto as a cash cow.

“It’s hugely problematic – we’re pushing every lever right now to change it,” said Kristin Smith, Director of the Blockchain Center.

However, some industry leaders have welcomed the new tax proposals, pointing out the bill could form a level of protection for cryptocurrency.

“This is long-term super positive, as much as taxes suck,” said Robert Leshner, Founder at Compound Labs.

“Once the US government realises that crypto can pay for infrastructure, it’s going to be less tempting to squash it.”

https://finance.yahoo.com/news/senators-push-bill-surprise-crypto-115026952.html

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This is a strange news story. I thought they had already implemented tax reporting on transactions larger than $10,000 many months ago.

The infrastructure bill in question is a whopping 2,700 pages long. Its doubtful lawmakers, experts or analysts will have a chance to read everything contained in the bill before its voted on.

If regulation regarding cryptocurrencies were snuck into the bill at the last minute, I would expect it to address stablecoins. Which regulators seemed very concerned about only a short time ago.

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[avikz]

I think the crypto community now needs to get ready to embrace such laws around the world where crypto incomes will have to be reported in your tax filing. Few months back, EU lawmakers also made a comment that crypto transactions must be made traceable. So I think more and more countries will take such drastic step to boost their tax income as well as to fight the illegitimate use of cryptos.

It's simple from the mindset of a ruler. No government will be happy to see a parallel monetary system that is not controlled by them. As cryptocurrency is getting more and more popular, expect more stringent legal sanctions to squeeze the juice out of it. Natural and expected.

But here the amendment has not yet been approved. So still a room for breather is available!

[The Sceptical Chymist]

In a surprise amendment to a massive bipartisan US infrastructure bill, senators have moved to collect tax on cryptocurrency – requiring transactions of more than $10,000 to be reported to the IRS.

It's not really that surprising to me that a bill like this is being introduced--I've been expecting more regulation, taxes, whatever, for a long time now.  And as far as the $10,000 reporting thing, I believe there is a current requirement for cash transactions at or above that amount to be reported to the IRS, but as far as I know the US doesn't consider bitcoin to be a currency but an asset, and thus it's probably been exempt from that rule. 

I'm not sure what the implications of this will be, assuming it makes it through.  I'm assuming that buying/selling crypto in amounts of $10k and above will have to be reported to the IRS, but beyond that I don't see how it will affect the average person who deals with amounts much less than that in one shot (which is probably a significant proportion of bitcoiners).  We'll see if it becomes law, and I'd be interested to hear others' thoughts on this.

[stomachgrowls]

I think the crypto community now needs to get ready to embrace such laws around the world where crypto incomes will have to be reported in your tax filing. Few months back, EU lawmakers also made a comment that crypto transactions must be made traceable. So I think more and more countries will take such drastic step to boost their tax income as well as to fight the illegitimate use of cryptos.

It's simple from the mindset of a ruler. No government will be happy to see a parallel monetary system that is not controlled by them. As cryptocurrency is getting more and more popular, expect more stringent legal sanctions to squeeze the juice out of it. Natural and expected.

But here the amendment has not yet been approved. So still a room for breather is available!

Yes they can but not would be fully be implied because the only thing that they could touch is only into those platforms which had been regulated by them on where users could potentially be get taxed since
they could able to trace them up due to KYC but in overall aspect then its just the small part of the picture.

They cant really get a hold for those who do make out transactions which doesnt involved into these platforms and even how hard theyve been pushing a certain bill then it would be somewhat
useless but for users in near future then KYC wouldnt really be a surprising thing.

Government is really that serious when it comes on taxing everything.

[arallmuus]

I think the crypto community now needs to get ready to embrace such laws around the world where crypto incomes will have to be reported in your tax filing.

Eventually when crypto gets bigger then everyone will want a piece of it. Trillion of dollars has been going into crypto ever since the pandemic hit most of the countries leaving the interest rate for goverment bond lower than the average so the only way to get some of it back is to tax crypto. In some countries the tax rate is so much lower compared with US so you could still be making some fortune from crypto without having to worry about taxes.

expect more stringent legal sanctions to squeeze the juice out of it.

We are currently in pandemic so expect alot of things to be taxed eventually.

[paxmao]

At the end of the day the far west is eventually becoming the west coast. Crypto has a value and like anything else that is traded, is subject to taxation and it has been perhaps too long the times in which IRS and other national equivalents have ignored it. I come from a country where the institution that collects taxes is absolutely rapacious and is perfectly able to go back and collect taxes for the last 5 years. Perhaps, what I mean is that is much better to have it regulated.

The 10k threshold seems odd. Is that per year? Per transaction? What about 100 transactions of 9999 usd ?

[Sithara007]

The 10k threshold seems odd. Is that per year? Per transaction? What about 100 transactions of 9999 usd ?

Yes.. that's what I was also thinking. Personally I don't have an issue with the 10K limit, as I have never transacted that much in a day. And that will be the case with more than 99% of the cryptocurrency users. Even those who want to transact more can do so using multiple exchanges. For example, if I want to convert $25,000 worth of Bitcoin to Ethereum, I can do it this way - $9,000 in Binance, $9,000 in Huobi and $7,000 in Gate.io. Now they will not report these transactions to the IRS, since the volume is below the threshold.

That said, users from the United States are supposed to report each and every transaction involving cryptocurrency to the IRS (irrespective of the amount). So I don't think that this new law will create any additional headache for them. The issue is for non-US users.

[avikz]

I think the crypto community now needs to get ready to embrace such laws around the world where crypto incomes will have to be reported in your tax filing. Few months back, EU lawmakers also made a comment that crypto transactions must be made traceable. So I think more and more countries will take such drastic step to boost their tax income as well as to fight the illegitimate use of cryptos.

It's simple from the mindset of a ruler. No government will be happy to see a parallel monetary system that is not controlled by them. As cryptocurrency is getting more and more popular, expect more stringent legal sanctions to squeeze the juice out of it. Natural and expected.

But here the amendment has not yet been approved. So still a room for breather is available!

Yes they can but not would be fully be implied because the only thing that they could touch is only into those platforms which had been regulated by them on where users could potentially be get taxed since
they could able to trace them up due to KYC but in overall aspect then its just the small part of the picture.

They cant really get a hold for those who do make out transactions which doesnt involved into these platforms and even how hard theyve been pushing a certain bill then it would be somewhat
useless but for users in near future then KYC wouldnt really be a surprising thing.

Government is really that serious when it comes on taxing everything.

That's true! But the crypto community is getting bigger day by day! How many percentage of newcomers are buying from decentralized exchanges? Not a lot of them! Majority of the newcomers are buying from centralized exchanges where KYC is a norm! I can see TV commercials from various centralized crypto exchanges in my country. So these newcomers don't have a place to hide their crypto holdings.

Some early adopters can effectively hide their crypto holdings because of their knowledge of cryptocurrencies. They know the use of Dex, swaps, mixers etc. But that's not very common with the newcomers. That's what government is targeting now!

[NeuroticFish]

I thought they had already implemented tax reporting on transactions larger than $10,000 many months ago.

It's not related to tax reporting. It's about the value of transactions. As said, cash has the same regulations and I guess that banks also send reporting if you make that high amount transactions.
It's sad though, since with this they keep bashing the law abiding citizen, while those who want to hide the huge transactions can still do that, pretty easy, whether it's with fiat or crypto.

[Karartma1]

I thought they had already implemented tax reporting on transactions larger than $10,000 many months ago.

It's not related to tax reporting. It's about the value of transactions. As said, cash has the same regulations and I guess that banks also send reporting if you make that high amount transactions.
It's sad though, since with this they keep bashing the law abiding citizen, while those who want to hide the huge transactions can still do that, pretty easy, whether it's with fiat or crypto.

That's right, they're very simply borrowing what's already happening with current fiat money transactions by applying it all to crypto. The real question is, as OP says, what could they possibly have written in 2700 pages? And more importantly how long did it take them to write all that stuff?
GPT-3 will certainly have given them a hand.

[palle11]

If regulation regarding cryptocurrencies were snuck into the bill at the last minute, I would expect it to address stablecoins. Which regulators seemed very concerned about only a short time ago.

We know all the effort of policy and parliament sitting on cryptocurrency is about regulation. Tax reporting certainly is one of it and the effect is to check who gets what and who sent what. It is unfortunate to see that government is not resting but keep fighting to restrict financial freedom.

The government has made its way to CBDC of there own but keep peeping into cryptocurrency. They may cut your expectation off  by not discussing or addressing stablecoins but what are they suppose to address on it? It is already pegged with Fiat.

[Coyster]

I'm not sure what the implications of this will be, assuming it makes it through.  I'm assuming that buying/selling crypto in amounts of $10k and above will have to be reported to the IRS, but beyond that I don't see how it will affect the average person who deals with amounts much less than that in one shot (which is probably a significant proportion of bitcoiners).  We'll see if it becomes law, and I'd be interested to hear others' thoughts on this.

I second that, and as far as I can understand on this issue, it's not really going to have a far reaching implications on crypto, $10k and above in crypto is a really large sum of money that quite a lot of people wouldn't ordinarily send in one go, not to talk of now that transactions to the tune of that amount would be reported to the IRS, this would make more people reluctant to go above that threshold in just one transaction, I think this is pretty easy to circumvent, judging by how I see things.

The 10k threshold seems odd. Is that per year? Per transaction? What about 100 transactions of 9999 usd ?

It looks like it's definitely going to be per transaction, if it's per year, then pretty much more than half of crypto users transaction would be reported to the IRS, it should definitely be per transaction, and just like I said above, it looks somewhat easy to bypass if it's that's way.

[Caldear]

As the usage and popularity of cryptocurrencies increase, the country will enact stricter legal measures to increase taxation.

With the amendment approved, the bill will now be presented to the House of Representatives and the US Senate where it could soon be written into law.
The IRS has been examining crypto for a while. Last year it added a line about cryptocurrency to its individual tax returns.

Any income has a taxable scope, and they are only forced to report to the tax bureau for taxation when it exceeds 10k. If the bill is passed, you will be tax-exempt at 10k and below. With capital gains, I believe it will still increase the tax rate on normal income.

[just_Alice]

Bitcoin and other cryptocurrencies were already considered as property and there was an obligation to pay taxes on income made from cryptocurrencies.

However, I assume many people were able to evade taxes, so this new bill is aimed to fix it. As far as I understand, it focuses strictly on exchanges and now they have to sort of tell on their customers making big txns, so it would be easier to collect taxes for the IRS.

[Xinarae*]

There is currently no tax on bitcoin and cryptocurrency bitcoin is decentralized and out of control. The senators moved the bill forward with a wonderful crypto tax amendment because they want to move their bill forward through this tax cryptocurrency transactions are taxed but in many countries it is not taxed that coin cannot be seen in reality. It only exists online the most popular cryptocurrency in the world is bitcoin the new bill aims, there is no tax on income.

[cabron]

I saw the news.  Senators Rob Portman and Mark Warner proposed amendments to the crypto tax reporting rules put forward by the cryptocurrency provisions of the Senate infrastructure bill.
The new amendments state briefly that the proposed reporting requirements exclude proof-of-work mining as well as the sale of software and hardware that supports hot and cold cryptocurrency wallet functionality.
Validate distributed ledger transactions through proof of work mining or selling software hardware whose sole function is to allow people to control the private keys used to access digital assets on the distributed ledger.

Senator Cynthia Lummis and Ted Cruz are strongly preventing this unacceptable bill to be passed actually, seem to be the hero of the crypto fight against this tyrant bill. I'm glad there are senators fighting for our freedom and privacy here.

The bill being discussed live on TV is also making this industry a lot attractive now for new investors. This is exactly what crypto needs as well to have a wide audience for people to realize we are in a growing economy.

[amishmanish]

Eventually when crypto gets bigger then everyone will want a piece of it. Trillion of dollars has been going into crypto ever since the pandemic hit most of the countries leaving the interest rate for goverment bond lower than the average so the only way to get some of it back is to tax crypto.

Not really Trillions of dollars. The DeFi TVL currently stands at just above 84 billion. Thats a far cry from a trillion dollar. Going by the market-cap on CMC would be wrong and even that won't amount to a trillion dollars.

In the OP, Rober Leshner has welcomed taxes and I think this is the attitude that most of these Lending/ borrowing platforms will take. If taxation means acceptance for them, they'd be more than happy to be co-opted by the legacy financial system. The trend of PoS coins and governance based on vote-by-wallet, these services have been more centralized that anybody wants to accept, most of all the people behind these projects who now have billions on the line. (Vitalik and Co.) Bitcoin is still and will remain untouched by these centralizing tendencies. Thus, taxing Bitcoin transactions would really be like taxing normal fiat transactions (for which you guys say there is already a per day rule).

IMO, The regime should be radically different for Bitcoin and the rest. The rest are centralized corporations providing financial services available to everyone in the world due to their blockchain nature. Bitcoin provides no service. There is no corporation behind it. People just want to keep it and use it. Why should that be taxable??
 

[Sithara007]

It looks like it's definitely going to be per transaction, if it's per year, then pretty much more than half of crypto users transaction would be reported to the IRS, it should definitely be per transaction, and just like I said above, it looks somewhat easy to bypass if it's that's way.

That would leave a loophole. If someone wants to send $100,000 worth of BTC or ETH to someone else, then he would simply split it to ten different transactions of sub-10K size. I don't think that the IRS will be leaving such a loophole. They will most probably put this threshold on the daily limit. That said, how many of us transact more than $10K per day, and that that too, with the same exchange? I am more worried that over time, they may reduce this limit progressively. First to $1000, and then to $100.

[Gyfts]

I thought they had already implemented tax reporting on transactions larger than $10,000 many months ago.

It's not related to tax reporting. It's about the value of transactions. As said, cash has the same regulations and I guess that banks also send reporting if you make that high amount transactions.
It's sad though, since with this they keep bashing the law abiding citizen, while those who want to hide the huge transactions can still do that, pretty easy, whether it's with fiat or crypto.

That's right, they're very simply borrowing what's already happening with current fiat money transactions by applying it all to crypto. The real question is, as OP says, what could they possibly have written in 2700 pages? And more importantly how long did it take them to write all that stuff?
GPT-3 will certainly have given them a hand.

I've followed American politicians for too long and the general idea of these large spending bills is this - A bunch of politicians will get a page or two dedicated to something that might benefit their constituents or special interests groups, so no one ever reads the entire bill, and it's stuffed with a bunch of useless spending that will benefit an obscure locality in a minute way. Other larger provisions will be included of course, but they could condense it down 10 fold. They want the world to be ignorant to their spending.

[dkbit98]

It looks like there are some conflicts between regulators inside US government, so CFTC (Commodity Futures Trading Commission) and SEC (Securities and Exchange Commission) often have different outlook on things.
CFTC publicly claimed they hold regulatory authority not the SEC, so it sounds like a battle what agency will bring more cash from taxes and have more power and control.
Take note that SEC chairman is Gary Gensler (he is asking for more authority for his organization), and CFTC chairman is less known Rostin Behnam.
It is a good thing that we have support from few senators like Cynthia Lummis but period ahead of us is not going to be easy for Bitcoin regulations, that is for sure.