In welcome news for the U.S. crypto industry, the Treasury Department is slated to clarify that only crypto companies that fit its definition of “brokers” will have to comply with new tax reporting requirements outlined in the country’s US$1 trillion infrastructure bill, Bloomberg reports.
Fast facts
- Quoting an anonymous Treasury source, Bloomberg reported that crypto miners, developers and other industry actors will not face increased reporting requirements so long as they don’t behave as brokers under existing Treasury Department definitions. No blanket exemptions will be granted based on how firms define themselves, but will be applied to their actual behavior.
- Despite sustained lobbying attempts by the crypto industry, the bipartisan bill passed the Senate last week with a provision seeking to claim an estimated US$28 billion over a decade by raising reporting requirements for any broker in the crypto industry. Many feared the bill used an unreasonably broad definition of broker, however, which would have seen miners and developers subject to the same requirements as brokerage services.
- Aside from potentially stifling growth in the industry, many experts were concerned that miners would not be able to collect customer details required for Internal Revenue Service Form 109 due to the permissionless basis of network validation.
- “As those who understand crypto already know, users are pseudonymous & access is permissionless. It’s literally impossible for non-custodial actors like miners to get the information they need to do Form 1099s. In practice, this could mean a de facto ban on mining in the USA,” said Compound Labs General Counsel Jake Chervinsky on Twitter.
- The guidance is set to be made public next week, well before the bill is expected to be voted on in the House to make it law. Although the possibility of further amendments to the language of the legislation remains, given the nature of the bill, which is tied to the success of further legislation, the likelihood of amendments being made before the vote remains slim.