Tax provisions of the stimulus plan contested for several months
Last summer, many players in the crypto-asset industry in the United States were moved by certain provisions of the Infrastructure Bill. Indeed, if the stimulus plan in question is far from relating only to cryptocurrencies, an amendment at the beginning of August was the source of a lively and engaged debate.
Recall of facts. A first amendment, from Senator Rob Portman, redefined the notion of broker. To summarize in one sentence, a broker is now any legal person or entity handling digital assets.
This amendment triggered an outcry from the cryptocurrency industry, but also from other senators. They considered that the definition of digital assets had not been finalized and that as a result, many entities could then be considered as “brokers”.
Two sub-amendments followed and a compromise, which had finally been found. Only problem, the will of a single senator buried the said compromise. From now on, a minor, a player in decentralized finance (DeFi), an exchange platform or any entity using proof-of-stake (PoS) is considered a broker.
👉 To read – United States: a tax amendment highly contested by the cryptocurrency sector
New tax obligations for the crypto sphere in the United States
As predicted by the US parliamentary shuttle, the stimulus package returned to Congress this fall. It has been passed and must now be approved and signed by President Joe Biden. What are the direct and practical consequences for these “new brokers”?
Entities treated as brokers must file no less than 1,099 forms with the Internal Revenue Service (IRS), the tax administration in the United States. Some of these forms disclose the names and addresses of the clients of these brokers.
These tax obligations should therefore become mandatory for players in the cryptocurrency sphere in the United States. Some estimates show an additional inflow of $ 28 billion as a result of these new arrangements.
The American crypto-community then quickly stepped up to the plate. Indeed, in addition to the administrative burden that this would generate for the majority of players, certain provisions are quite simply inapplicable.
In the first place, the definition of a broker is aimed at everyone without distinction, from a platform like Coinbase to a small DeFi protocol or a miner. However, some people know that the three aforementioned entities do not have the same resources at all.
Second, it is simply or almost impossible to identify the identity of people on DeFi platforms. However, any violator of tax obligations could be penalized, even though he does not have the opportunity to meet the requirements.
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The cryptocurrency sector under attack in the United States
The stimulus package will most likely be signed by President Biden since he is the initiator. If it is wrong to say that the Infrastructure Bill only exists to increase the obligations of players in the cryptocurrency sector, the latter is far from being in the odor of sanctity on the other side of the Atlantic.
Since the heated debate over the stimulus package last summer, the Biden administration has indeed returned to the charge. First of all, she would like to “help” other countries by forcing American exchange platforms to track down foreign users.
Above all, Democratic parliamentarians in Congress would now like to tackle personal taxation. They believe that it would be akin to a “tax loophole” which should be ended. So we’re probably not done with digital asset reforms in the United States.
👉 To read – United States: Democrats want to end the “tax niche” of cryptocurrencies
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About the author: Benjamin Allouch
Formerly a lawyer specializing in personal data and digital law, I quickly became interested in Bitcoin, blockchain technology and their legal implications. Today, I am an independent consultant and writer in the field of cryptocurrencies and blockchain.
All articles by Benjamin Allouch.