U.S. Senators on Thursday revised a section of the bipartisan infrastructure bill to ensure that cryptocurrency miners, hardware vendors and software developers are exempt from collecting user data needed to report taxes.
Congress is stepping up efforts to prevent crypto investors from evading their taxes every time they buy or sell Bitcoin and the like. The new legislation focuses on “brokers,” requiring anyone involved in processing digital financial transactions to register the names, addresses and other forms of payor and payee data recorded in 1099 tax forms for the Internal Revenue Service. .
But the definition of who is a broker or not was too broad, according to experts. Now the bill has been amended to make it clear that cryptocurrency miners, blockchain engineers, or vendors selling hardware to run hash algorithms to strike digital coins are exempt from the new rules. They will not have to collect the personal data of anyone using their services or chips.
âInvestors who do not pay the tax they owe through cryptocurrency is a real problem, and I strongly support third-party reports by exchanges where cryptocurrency is bought, sold and traded,â Chairman of Senate Finance Committee Ron Wyden (D-Or), who helped amend [PDF] the bill, said in a statement.
âOur amendment makes it clear that whistleblowing does not apply to people developing blockchain technology and wallets. This will protect US innovation while ensuring that those who buy and sell cryptocurrency pay the taxes they already owe, âhe confirmed.
Instead, the invoice targets crypto exchanges, which will need to report their customer’s information. Investors and traders buying and selling cryptocurrencies through these exchanges will be taxed accordingly. Digital money is roughly treated like a real estate asset, people have to report the profits and losses made when they are traded for real money, traded for another type of cryptocurrency, or used to pay for money. goods, according to Coindesk.
Congress hopes that recording the payer and payee details in every financial transaction will reduce the chances that cryptotraders can get away with not paying their dues. This money will then be used to fund the $ 1.2 billion infrastructure changes outlined in the legislation. [PDF]. But forcing miners and engineers, who do not manage cryptocurrencies on behalf of traders, to collect this information is potentially dangerous, the Electronic Frontier Foundation has found.
âThe mandate to collect customer names, addresses and transactions means that almost any business, even tangentially related to cryptocurrency, can suddenly be forced to monitor their users,â he said previously. The heightened surveillance could lead to “honeys of private information about cryptocurrency users that could attract malicious actors.”
Fortunately, the bill has now been updated and the definition of a broker has been refined. The European Commission proposed similar rules to prevent money laundering using digital currencies last month as China takes a tougher approach. Â®