There's been a lot of talk around the $1.2 trillion Infrastructure Investment and Jobs Act passed into law at the end of last year. The legislation covers spending on much needed infrastructure, including water, electricity, internet, roads, rails, and airports. For the crypto space this bill made many uneasy as to finance all that work it will increase the tax on cryptocurrency and digital assets.
I have written on this bill before and I initially thought this bill was attacking crypto, but now I'm walking back my position and trying to decided if it's truly anti-crypto. I think there were many misconceptions surrounding the bill. My initial reaction was it was written to deliberately reduce cryptocurrency usage and kill the industry. There's lot of drama and conspiracies in the space. I once believed there was hidden malicious intent behind the excessive reporting requirements which will act as an incentive to decrease the usage of cryptocurrencies. Governments are worried about crypto that's fact, but some governments realize that this technology is not going away and are trying to navigate this regulatory landscape to not stifle innovation or financial gains they could see.
The Infrastructure Bill will not impact crypto investors for some time as the new requirements won't come into effect until January 2024. The industry is so new I can only imagine how much will change in 2 year. Right now, the crypto industry is already lobbying for clarification on certain aspects of the law. As it stands, there are tax and privacy implications for crypto investors, but honestly it's not far off from current fiat ands stock laws already in place.
I don't 100% agree with the law requiring any transaction involving more than $10,000 worth of crypto to be declared to the IRS. I get it with fiat because it's not traceable. I will argue that cryptocurrency transactions should not be viewed as cash equivalents. Cryptocurrency transactions are fully transparent and are traceable and trackable, by design, unlike cash transactions. We understand this, but the politicians making the laws don't understand the fundamental tech to see a difference. It's an education issue and people make laws using legacy systems as the basis.
Others don't liken that crypto has to be declared on taxes. However, put that into perspective any investment gains need to be declared. Under the new bill crypto brokers would have to report crypto transactions directly to the IRS using the 1099-B form. Again the bill misses external crypto wallets and decentralized finance services and regulators are not understanding the space. The 1099-B form has worked effectively for stock investments, but it's a legacy system that does not fit 100% with crypto tech. In fact I argue the whole tax system is outdated and crypto could streamline the entire process, but we would eliminate many jobs and industries which those in power would not want to do...
So I don't believe the bill is anti-crypto, but using legacy systems to regulate a new tech could have unintended consequences. The fact that regulators don't understand the space is the biggest risk to the system. It maybe naive of me to believe they are not maliciously attacking us and are just doing it out of ignorance and a lack of education.
I'd love to know if you think it's a lack of education that could have unintended consequences or if it's a direct attack.