What the Infrastructure Bill Means for Crypto

The infrastructure bill has been one of the most controversial parts of the Biden Administration’s agenda. It remains shrouded in controversy, and different parties offer their takes on what it will be and how it will affect the economy.

What the Infrastructure Bill Means for Crypto

However, in its current form, the bill also has angered a lot of crypto industry enthusiasts. Given that many believed that the Biden Administration would be more friendly toward digital assets, this bill doesn’t seem to be the best way to move forward.

So, it’s worth understanding how the bill affects cryptocurrencies and what concerns many in the industry.

Improving America's Infrastructure Holistically

The Infrastructure Investment and Jobs Act passed the U.S. Senate on August 10, 2021. The legislation proposes allocating $1.2 trillion in funds toward improving infrastructure across the United States. Following passage in the Senate, the bill is now in the final argument stages in the House, after which both chambers of Congress will need to reconcile their versions of the bill and present it to the White House for final approval.

While the bill’s total budget is about $1.2 trillion, the bill only allocates $550 billion in new spending. Some of the funds allocated will go toward the following:

  • Cybersecurity and climate change concerns - $47 billion
  • Power lines and cable upgrades - $65 billion
  • Improvements to the country’s water infrastructure - $55 billion
  • Road and bridge improvements - $110 billion
  • Internet expansions to low-income areas and rural communities - $65 billion
  • Rail transport optimization - $66 billion

What Does the Bill Mean for Crypto?

It is worth noting that the infrastructure bill largely doesn’t concern cryptocurrencies; but there is a part of the bill that has now caught the eye of industry insiders.

The infrastructure bill requires stricter reporting standards for cryptocurrency transfers. These standards will concern transfers from brokerage services to non-broker accounts, with the former having to report their transactions to the Internal Revenue Service (IRS).

Already, traditional stockbrokers must make regular disclosures to the IRS concerning their customers’ sales. The infrastructure bill looks to bring crypto brokers to the same playing field, ensuring the same standards also apply to them. While it doesn’t now, the bill could eventually pave the way for tighter reporting standards for the crypto industry - especially when it comes to tax reporting and disclosures.

Some estimates show the bill could result in up to $28 billion in revenues for the government over the next decade. At the same time, these revenues could improve the government’s ability to pay for some bill’s provisions.

Why Are Crypto Enthusiasts Angry?

The infrastructure bill identifies brokers as entities “responsible for and regularly providing any service effectuating transfers of digital assets on behalf of another person.” Anyone identified as a broker will have to deal with the reporting rules.

Apparently, the definition also includes crypto miners. Since miners don’t have customers, it will be impossible for them to fill the Form 1099 that brokers will be required to submit if the infrastructure bill passes.

The bill also requires that brokers submit reports of transactions north of $10,000 to the IRS; but crypto enthusiasts have claimed the bill’s provisions could violate the privacy of these “crypto brokers.” In a statement, the Electronic Frontier Foundation (EFF), a digital rights advocacy group, explained:

“The mandate to collect names, addresses, and transactions of customers means almost every company even tangentially related to cryptocurrency may suddenly be forced to surveil its users.”

Another problem lies with the nature of cryptocurrency transactions themselves. With digital assets being decentralized, transactions don’t connect individuals’ information with the transactions. This means that crypto exchanges and other asset service providers - whom the bill terms as “brokers” - won’t be able to access some information needed to submit to the IRS.

In a thread, Twitter chief executive Jack Dorsey explained that the infrastructure bill in its current form will only dissuade crypto companies from setting up shop in the United States:

“Forcing reporting rules on Americans who develop software and hardware, who mine and secure the network, or who run nodes to build resilience and efficiencies, is an impossible ask that will only drive development and operation of this critical technology outside the U.S.”

Where is the Bill Now?

Currently, the infrastructure bill remains stuck in the House. It had been set for an early October vote, but Speaker Nancy Pelosi delayed the vote in a move signaling that the Democrats don’t yet have enough support to get it over the goal line.

President Biden has continued to drum up support for the bill as he looks to have it passed as quickly as possible. While it will bring stricter reporting requirements to crypto transactions, the bill doesn’t seem to be a death knell in any way for the industry.

At the same time, compliance with this bill could encourage regulators and the government, in general, to be more friendly toward the crypto space going forward. There’s a greater need to discuss the bill and its nuances with government officials, but that will come eventually.

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