What does Bitcoin have in common with roads and bridges
There is a lot going on in the U.S. Congress right now. The Senate approved Tuesday’s $1 trillion infrastructure bill. One way is to impose tax reporting requirements on cryptocurrency brokers. This is similar to how stockbrokers report sales to the IRS. This could allow for tighter regulation of cryptocurrency, something that the Biden administration is pushing for as it pushes for tax compliance.
According to congressional accountants, the plan could generate revenue of approximately $28 billion over 10 years.
It is possible to stretch the $28 billion very quickly. Let’s take bridges as an example. According to the Federal Highway Administration, it would cost $25.6 billion to replace all bridges that are structurally deficient.
The currency you don’t have in your hands would pay for roads, bridges and water systems. It also helps to strengthen the electrical grid. President Joe Biden described it as a “generational investment” that is comparable to the construction of the transcontinental railroad in 1800s and the Interstate highway system in 1950s. This is a testament to the rapid growth of cryptocurrency in recent years, an attractive revenue source — and the increasing push by government officials to regulate a market that’s largely unregulated.
After weeks of wrangling, the Senate passed the bipartisan infrastructure package in a 69-30 vote. It now goes to the House.
Let’s take a look at the situation.
What’s the story with CRYPTOCURRENCY
The cryptocurrency market has exploded to $1.8 trillion. These are basically computer code lines that are digitally signed every time they travel from one owner to another. They are not tied to any banks or governments and allow anonymous spending or receiving of money. This appeals to libertarians, non-bankers and risk-taking millennials who feel the financial system is rigged.
It’s also popularized by international criminals as well as money launderers, drug dealers, and ransomware hackers.
Bitcoin is the most traded cryptocurrency, currently worth $45,000 per coin, down from $64,800 in April. It is notoriously volatile and can sometimes spike or plummet depending on Elon Musk’s provocative statements. Bitcoin is now accepted by some businesses. Some other well-known cryptocurrencies are Ethereum, Dogecoin Ripple, Litecoin and Ripple. There are many. Bitcoin and other currencies can be traded on exchanges that accept U.S. dollars or other national currencies.
WHERE DO GOVERNMENT-OFFICIALS STAND
Both sides of the coin
Many lawmakers view cryptocurrency as a source of technological innovation, particularly in the development and use of blockchain, a digital ledger that records transactions.
On the other hand, top U.S. regulators are displaying danger signs. Biden appointed Gary Gensler as chairman of the Securities and Exchange Commission. Gensler stated last week that the crypto market is “rife” with fraud, scams and abuse and needs to be protected. Gensler also said that Congress should give the agency more authority and funding to regulate it.
The Federal Reserve is currently considering creating its own digital currency that is tied to the U.S. Dollar. The so-called digital currency could facilitate faster payments between banks, consumers, and businesses.
Suzanne Lynch, a Utica College professor who studies financial crime, says that “federal agencies are not communicating on the same page.” It’s all so gray right now.
WHAT IS THE CONNECTION TO THE INFRASTRUCTURE BUILDER?
The Senate was working on the huge infrastructure package when the cryptocurrency debate landed. The Republicans opposed to expanding the agency’s reach, and a previous plan to pay for the legislation was scrapped. It would have boosted IRS enforcement to stop tax cheating by individuals. This would have generated an estimated $100 billion over ten years.
The plan for tighter tax reporting requirements for cryptocurrency brokers was created back at the drawing board for revenue raisers. It is estimated to generate $28 billion over a decade, which is less than the IRS crackdown proposal. It’s still one of the largest revenue-raisers in the infrastructure bill.
Some senators objected to it and launched an opposition lobbying campaign from the cryptocurrency industry and internet freedom advocacy groups.
Opponents claim that the provision is too broad in defining brokers. It could impede innovation by unfairly placing new tax reporting obligations on software developers. Opponents claim that these people do not have access to the data collected by the IRS from cryptocurrency users.
Opponents presented amendments to the provision, and a compromise was reached. It was rejected by the Senate, which sent the House to continue the discussion on cryptocurrency, taxes, and brokers.
WHAT IS THE SITUATION NOW WITH CRYPTOCURRENCY & TAXES
Experts say that although some cryptocurrency brokers report transactions to the IRS, most do not. The brokers place orders to buy and sell for users of cryptocurrency exchanges.
Exchanges must collect personal identifying information about users and report their annual activity annually to the IRS.
The IRS considers cryptocurrency “property” in the same way as stocks and gold. This means that capital gains tax is payable when the cryptocurrency is sold or cash in at a profit.