By MARCY GORDON, AP Business Writer
WASHINGTON (AP) – What does Bitcoin have to do with roads and bridges?
A lot right now in the US Congress. One of the ways that lawmakers are proposing to pay the $ 1,000 billion infrastructure bill approved by the Senate on Tuesday is to impose tax reporting obligations on cryptocurrency brokers, similar to how cryptocurrency brokers do. securities report their clients’ sales to the IRS. This could pave the way for tighter cryptocurrency regulation – something the Biden administration is moving towards as it pushes for tax compliance as well.
The plan could generate around $ 28 billion in revenue over 10 years, congressional accountants estimate.
The $ 28 billion could be used up very quickly. Take bridges, for example. It would cost about $ 25.6 billion to replace all of the country’s bridges classified as structurally deficient, according to the Federal Highway Administration.
So a currency you can’t hold in your hand would effectively pay for roads, bridges, water systems, high-speed internet access, and power grid strengthening, which President Joe Biden called “A generational investment” comparable to the construction of the transcontinental railroad in the 1800s or the Interstate freeway system in the 1950s. This is testament to the explosive growth of cryptocurrencies in recent years – a tempting potential source of income – and the growing push by some government officials to put new reins around a largely unregulated market.
After weeks of wrangling, the Senate passed the bipartisan infrastructure package by a 69-30 vote. It is now moving to the House.
WHAT IS THE HISTORY WITH THE CRYPTO-CURRENCY?
The cryptocurrency market has swelled to around $ 1.8 trillion. Essentially, these are lines of computer code that are digitally signed each time they pass from one holder to another. Not related to banks or governments, they allow users to spend or receive money anonymously. It appeals to libertarians, off-grid guys and millennials who take risks and believe the financial system is rigged.
But it’s also favored by international criminals, money launderers, drug dealers, and ransomware hackers.
The most traded cryptocurrency is Bitcoin, which is now worth around $ 45,000 each, up from a high of around $ 64,800 in April. It’s notoriously volatile, in some cases escalating or plunging into public statements by Elon Musk, the provocative CEO of Tesla Inc. Some companies are now accepting Bitcoin as a form of payment. Other well-known cryptocurrencies include Ethereum, Dogecoin, Ripple, and Litecoin. All in all, there are thousands of them. Bitcoin and the like can be bought and sold on exchanges with US dollars and other national currencies.
WHERE GOVERNMENT OFFICIALS IN PLACE?
On both sides of the coin.
Some lawmakers see cryptocurrency as a source of technological innovation, especially in the development of blockchain, the digital ledger that records transactions.
Major US regulators, on the other hand, are reporting danger signs. Gary Gensler, the chairman of the Securities and Exchange Commission appointed by Biden, said last week that investors need more protection in the cryptocurrency market, which he called “rife with fraud, scams and abuse “and” like the Old West “. As the SEC won dozens of cases against crypto fraudsters, Gensler said the agency needed more congressional authority – and more funding – to regulate the market.
The Federal Reserve, meanwhile, plans to develop its own digital currency pegged to the US dollar. A so-called digital dollar could enable faster payments among banks, consumers and businesses.
“You have federal agencies that are not on the same page,” says Suzanne Lynch, a professor at Utica College who focuses on financial crime. “It’s so gray right now.
WHAT IS THE RELATIONSHIP WITH INFRASTRUCTURE LAW?
The cryptocurrency debate landed amid Senate work on the massive infrastructure package. An earlier plan to pay for the legislation, strengthening the IRS’s enforcement to crack down on tax evasion by individuals and businesses, failed as Republicans opposed expanding the scope of the law. agency. It would have brought in around $ 100 billion over 10 years.
Going back to the income stream drawing board, the plan was crafted for stricter tax reporting requirements for cryptocurrency brokers. The estimated $ 28 billion it would generate over a decade is only about a quarter of what the IRS crackdown proposal envisioned. But it is still the biggest source of revenue among many in the infrastructure bill.
It has raised objections from some senators and sparked an opposition lobbying blitz from the cryptocurrency industry as well as internet freedom groups.
Opponents say the provision defines brokers too broadly, potentially stifling innovation by unfairly imposing new tax reporting obligations on software developers and crypto “miners” – users who create coins by lending money. computing power to verify other users’ transactions and receive coins in exchange. These people do not have access to cryptocurrency user data that the IRS would collect, opponents say.
Opponents proposed amendments to the provision and a compromise emerged. But he failed to gain Senate approval, pushing debate over cryptocurrency, taxes, and brokers into the House.
WHAT IS THE SITUATION NOW WITH CRYPTOCURRENCY AND TAXES?
Some cryptocurrency brokers already report transactions to the IRS, but most don’t, experts say. Brokers place buy and sell orders for users on cryptocurrency exchanges.
Exchanges are required to collect personally identifying information from users and report their annual activity to the IRS.
The IRS defines cryptocurrency as “property” similar to stocks or gold. This means that you pay capital gains tax when you sell it or cash it in at a profit.
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