A digital asset specific clause in the 2,702 page US Infrastructure Bill almost brought the entire USD$1 trillion package to a halt. The problem included the way that the Bill defined a 'broker', broadening the definition to include a person who "is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person". Such broad drafting naturally would capture both miners, digital currency exchanges and potentially node operators of blockchain infrastructure.
The US Infrastructure Bill, at its core, is legislation used to plan and budget for reforms to US infrastructure including roads and highways. The US Joint Committee on Taxation (JCT) reported that the provision dealing with the definition of crypto 'brokers' could raise USD$28 billion towards the costs of the infrastructure package, a figure that may reduce if miners, node operators and digital currency exchanges were no longer included in that definition.
The change proposed relates to information reporting rather than a new tax. However, it is not clear how the JCT has calculated the USD$28 billion figure which seems to be an estimated increase in tax revenue arising from additional reporting..
The revised definition of a broker was subject to strong pushback which resulted in a bipartisan amendment but unfortunately a single senator blocked that amendment, ultimately passing the senate with the original language.
The digital asset industry is grappling with the possibility of new reporting and the undesirable consequences of the Bill, including that it may be 'unworkable' in practice. However commentators have indicated that it's not all doom and gloom as the changes don't take effect for another 2 years, and will be used as part of rule making by government agencies so may not result in as broad a practical application as the amendment suggests. There remain other ways to clarifiy the intention of the definitions without redrafting the foolishly broad provisions, such as through guidance and speeches.
Jaret Seiberg, financial services analyst for the Cowen Washington Research Group, took a more positive approach, in saying:
The tax reporting language is one of the clearest indications that Washington is prepared to accept crypto as a permanent part of the financial ecosystem. [It] now sees crypto as a real product that is worthy of government attention, [which] tells us that Washington is done looking at ways to end crypto.
One thing that has been clear from this process is that digital currency businesses have started moving into an active engagement with government, including using major lobbying firms in Washington, which is a shift from the earlier days of digital currency, when there was far less engagement. We hope Australian lawmakers can learn from this experience to ensure that when changes are proposed to laws to encompass digital assets, they are carefully considered and seek to avoid unintended consequences.
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