They believe the new reporting requirements could be detrimental to the economic viability cryptocurrency markets. These markets have experienced a rapid expansion of new users since the pandemic.Many are unsure that the bill will be repealed given the potential loss of tax revenue and the progress made so far on it. They instead focus on making improvements.On Thursday, industry groups such as the Blockchain Association, Coin Center, and the Association for Digital Asset Markets voiced their opposition to the requirements. They also took note of the draft version's provisions that could result in targeting individual users.Perianne Boring is the founder and president of The Chamber of Digital Commerce. She stated in an interview that her group had proposed to amend the bill language to tighten definitions of what constitutes brokerage activity to exclude artificial intelligence platforms and business transmitters.Boring stated that the idea of making this a congressional mandate or a revenue-generator to generate more money for something totally unrelated is not the best way to achieve the best policy. Boring also noted that ADAM and other groups have repeatedly requested guidance from IRS regarding how to enforce existing laws.Michelle Bond, CEO of ADAM, stated that it was crucial for the industry to attend the table and provide technical assistance for such large-scale proposals.The tax compliance issue with cryptocurrency is a serious problem. Legislators are eager to get the $28 billion they propose to raise to finance their big-ticket spending plans.This complicated issue could have a significant impact on securities and banking law. It crosses all jurisdictions within Congress, including the tax committees and banking panels.After Republicans defeated a plan to increase IRS enforcement through greatly expanding its budget, the Republicans have now decided to raise cryptocurrency reporting requirements. This is something Democrats will likely address in a separate tax reconciliation package.Charles Rettig, the IRS Commissioner, has repeatedly asked for more power to ensure tax compliance in cryptocurrency markets. Many market participants are not aware of their obligations or are cheating.Industry officials will fight the proposals even though they promise to do so, but it's likely that they'll face a difficult battle.After weeks of deliberating over how to pay for the plan's cost, the Senate is expected to quickly vote on the plan.A major education campaign is required for any lobbying effort because few legislators are familiar with cryptocurrency and how they relate to taxes. Senator Rob Portman (R-Ohio), is the Congress' most knowledgeable member on this issue. Rob Portman (Republican from Ohio) is one of the principal authors of the larger infrastructure package.The proposal is largely intended to mirror the reporting requirements imposed on stock sales in companies such as Apple and Ford.Brokers would have to report the basis of people, which is the price they purchased cryptocurrencies at, along with their gross proceeds. This would make it easier to calculate their tax bills. Studies have shown that people are less likely to avoid tax obligations if they know someone who is reporting their income to IRS independently.The Treasury Department also wants to see anti-money laundering provisions in the law. This would require that transactions exceeding $10,000 be reported to government.Legislators are currently discussing language to expand the definition of broker so that they include decentralized exchanges without traditional middlemen. However, some argue the language is wide enough to cover other entities like cryptocurrency miners.Lisa Zarlenga, a partner in the firm Steptoe & Johnson LLP, who works on cryptocurrency tax issues, stated that the extension of the definition broker was a surprise.Another cause of contention is the possibility of provisions that go beyond cryptocurrency to include other digital assets such as non-fungible tokens.Although the Treasury Department was already working on rules to tighten reporting requirements for brokers like Coinbase and other financial institutions, Congress' imprimatur would prevent any legal challenges to the agency's authority to issue new regulations.Officials in the industry are vowing to fight.Kristin Smith, Executive Director of Blockchain Association, expressed frustration at the rush to draft the legislation. She said it could impose new regulations on many different actors within the ecosystem.She said that she believes it would drive a lot more crypto-related businesses and actors overseas, and stifle innovation in the United States.The plan is expected to raise $28 Billion, but that's highly uncertain. This estimate instantly raised eyebrows.Although Congress' budget forecasters can accurately predict the cost of tax changes similar to those made by lawmakers before, such as the expansion of the child tax credit, they are less confident in predicting the cost of more innovative policy proposals.Because cryptocurrencies have volatile valuations, it can be difficult to determine how many people are purchasing and selling them. Forecasters also need to make assumptions about their likely tax rates.
