Crypto assets have been the subject of growing congressional scrutiny in recent years and even received attention in the Federal Reserve’s semiannual monetary policy report back in July. In addition, over 30 crypto-related bills were introduced in the 116th Congress. Investors, blockchain innovators, and digital asset intermediaries, among others, should be cognizant of potentially impactful legislation being considered by Congress. As part of the negotiations over an infrastructure framework, Congressional leaders and the White House are considering changes to the Internal Revenue Code that would dramatically increase both the number of crypto-currency transactions that must be reported to the IRS and the persons that would be subject to this reporting regime. Highlights of the proposed changes are as follows:
- Currently, businesses that accept $10,000 in cash must report those transactions to the IRS. That requirement would be expanded to include the receipt of digital assets, which is defined to include crypto-currencies.
- Currently, securities brokers are required to report their customers’ securities transactions. The proposed legislation would drastically expand who is deemed to be a “broker”, and would require “brokers” to report any transfers of a digital asset, including crypto-currencies.
- The term broker would be expanded to include any person who, for consideration, is responsible for regularly providing any service effectuating the transfers(s) of digital assets on behalf of another person.
Congress’ goal with this new legislation is to increase the reporting of crypto-currency transactions by virtual currency exchanges and businesses that receive crypto-currency in the course of operating their businesses. But the broad definition of broker – any person responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person – has sparked significant backlash throughout the crypto-currency community. Clearly, cryptocurrency is here to stay, and it appears that is also the case with regard to the government’s efforts to regulate it. In the coming months, we should expect a growing focus on this developing area of the law.
