Section 80603: Information Reporting for Brokers and Digital Assets.
Biden’s “bipartisan” infrastructure bill was released late tonight (August 1st ), and as expected, there’s fuckery about. Concern over the past few weeks has been the inclusion of rhetoric that could result in heavier regulations that miners would simply not be able to comply with and further taxing on crypto-currencies. That’s exactly what’s happening, assuming this bill passes, which I believe it will. Let’s get into the bill and what it actually means, since the favored game of politicians is to make ridiculously difficult documentation hide their sadistic nature. First, they updated the definition of broker in order to raw dog anyone making money in crypto to include a sub-paragraph. Here is the definition of a broker as defined in the U.S. Code § 6045 - Returns of brokers of the Internal Revenue Code of 1986.
“(1) Broker The term “broker” includes— (A) a dealer, (B) a barter exchange, and (C) any other person who (for a consideration) regularly acts as a middleman with respect to property or services. A person shall not be treated as a broker with respect to activities consisting of managing a farm on behalf of another person.”
See subsection (C)? Anyone who regularly acts as a middleman with respect to property or services…. A MINER IS REQUIRED TO EXECUTE YOUR TRANSACTIONS. They are the middlemen of a transaction; this is a direct attack on mining. But it doesn’t say anything about crypto or digital assets, right? Here’s the updated subsection.
‘‘(D) any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.’’.
Miners, exchanges, DAO’s, asset managers, anyone who transacts on behalf of another person, that’s who is affected. So, what defines a “Digital Asset” and what exactly is this bill making them do? Let’s take a look at the new definition.
‘‘(D) DIGITAL ASSET. —Except as otherwise provided by the Secretary, the term ‘digital asset’ means any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary.’’
So, unless the Secretary realizes they are an idiot and want to change it whenever because the technology evolves, then they can scrap it and call whatever they want a “Digital Asset”. As of right now, it’s any token on a blockchain or “similar technology”.
Alright, so what does the bill make these people do? I’M GETTING TO IT!
‘‘(d) RETURN REQUIREMENT FOR CERTAIN TRANSFERS OF DIGITAL ASSETS NOT OTHERWISE SUBJECT TO REPORTING.—Any broker, with respect to any transfer (which is not part of a sale or exchange executed by such broker) during a calendar year of a covered security which is a digital asset from an account maintained by such broker to an account which is not maintained by, or an address not associated with, a person that such broker knows or has reason to know is also a broker, shall make a return for such calendar year, in such form as determined by the Secretary, showing the information otherwise required to be furnished with respect to transfers subject to subsection (a).’’
As always, a load of gibberish, so what does it mean? Any “broker”, or whoever they determine is a middleman in a blockchain transaction is required to make a “return”. What is a return? A statement. A receipt. Proof of what you gained or lost in the transaction. How do you track that on a public ledger where everyone is anonymous (mostly)? Technically, they could allow to file per block transactions and only report wallet addresses, but we all know they won’t do that. This is one step closer to KYC (Know Your Customer) requirements where they start wanting everyone’s names and socials and blah blah blah. A technology built outside the state to retain anonymity is being required by the state to identify their transactions. This is one horrible step in the wrong direction for the United States Government, and it will not be the last. When does this happen?
“EFFECTIVE DATE. —The amendments made by this section shall apply to returns required to be filed, and statements required to be furnished, after December 31, 2023.”
“(d) RULE OF CONSTRUCTION. —Nothing in this section or the amendments made by this section shall be construed to create any inference, for any period prior to the effective date of such amendments, with respect to whether any person is a broker under section 6045(c) of the Internal Revenue Code of 1986, or (2) whether any digital asset is property which is specified security under section 6045(g)(3)(B) of such Code.”
It looks farther away than it is. In the short term, we will see how this reporting plays out after the bill is passed. They won’t allow the returns to simply record wallet addresses because you can’t chase a wallet address for tax fraud. They need a name and that’s what they will be going after. How do the miners get a name that doesn’t exist?
Stop thinking this is a “peaceful revolution”. There are people who have put their lives into maintaining and prospering this network (Bitcoin) and others, not to mention exchanges and other businesses that will be affected should this go through. This isn’t just about mining, it's about every system of anonymity currently in place that they want to tear down for the sake of collecting a profit.
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