New infrastructure bill cracks down on crypto tax evasion

Crypto exchanges will have to start producing 1099-B forms for traders on their platforms if the new infrastructure bill is signed into law. This will formalize the taxpayer process for crypto traders and crypto investors won’t have to calculate their own taxes anymore. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi

The cryptocurrency industry is lobbying hard this week against language in the Senate’s bipartisan infrastructure bill proposal that could choke a vast amount of the crypto ecosystem.

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.”

As of Monday, the language hasn’t been finalized, and there’s still time to fix it before it is, or even through a later bill, according to Kristin Smith, executive director of the Blockchain Association, a crypto trade association that works to change public policy at the federal level.

Bitcoin fell more than 5% Monday, and ether lost 1.8%, according to Coin Metrics, with some of the uncertainty around the bill weighing on sentiment.

The biggest worry is that the language would “detract people from wanting to invest or participate in crypto networks in the United States,” Smith told CNBC.

Jake Chervinsky, a lawyer experienced in crypto-related securities litigation and government enforcement defense matters who is now general counsel at the decentralized finance (DeFi) firm Compound Labs, said it would also be detrimental to existing businesses that would be unable to comply.

“In practice, your only options would be to shut down or move offshore,” Chervinsky said. “That’s what this bill threatens to do to U.S. crypto companies by forcing them to report information to the IRS that they don’t have and can’t get.”

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New infrastructure bill cracks down on crypto tax evasion

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