 ICYMI: Legislators Move To Narrow Cryptocurrency Reporting Rules In case you missed it, legislators introduced a bipartisan bill Thursday to clarify rules on who has to report cryptocurrency (or "digital asset") transactions to the IRS. The bill, called the Keep Innovation in America Act, aims to "fix" what legislators describe as new, "poorly constructed" requirements on reporting transactions involving cryptocurrency. People in the U.S. are already required to report revenue, income, or investment gains made with cryptocurrency, but the government has struggled to verify those transactions.
What Are the Rules Now? The recently signed infrastructure package includes regulations around reporting cryptocurrency transactions to enforce tax laws. According to the new rules, cryptocurrency "brokers" (like the crypto exchange platform Coinbase) will be required to record and report transactions to the government, similar to what stock brokers and brokerages do. The new rules are meant to reduce the ability of people and businesses from hiding gains, income, or revenue from cryptocurrency. In an August report, the Joint Committee on Taxation said this would capture roughly $28 billion in revenue over the next decade.
According to the infrastructure package, brokers must report crypto transaction information, but critics and lawmakers have said the law's definition of a "broker" is too broad and includes individuals and entities involved in many parts of a cryptocurrency transaction, including people who do not have access to the necessary personal information for tax reporting, like name and addresses.
"Miners and validators, hardware and software developers, and protocol developers are not true brokers and do not collect or have reason to collect this information," lawmakers wrote in the one-page summary of the bill.
Through the Keep Innovation in America Act, lawmakers would also look into the infrastructure law's expansion of the definition of cash (as far as tax reporting is concerned) to include digital assets, which lawmakers say would require large transactions to be reported to the government and could "raise privacy concerns." Currently, banks and financial institutions must report certain cash transactions to the government to prevent money laundering, but critics say that by adding cryptocurrency under that umbrella, it could be too difficult for some participants in cryptocurrency transactions to follow.
So What's the Fix? Among other things, the Keep Innovation in America Act would:
Here's the Catch: Supporters of the crypto industry have applauded the bill, but it still has to pass in the House.
- Kristin
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