Updated version of US infrastructure bill narrows cryptocurrency reporting requirements

According to CoinDesk, an updated version of the U.S. Senate’s bipartisan infrastructure bill narrows the definition of “broker.”

The Senate is debating the bill, which would provide about $1 trillion in funding for infrastructure improvements across the country, partly from an estimated $28 billion in taxes generated by crypto transactions.

Earlier versions of the bill sought to achieve this for tax purposes by increasing information reporting requirements and expanding the definition of “broker” to include any party that might interact with cryptocurrencies, including decentralized exchanges or other non-custodial service providers.

According to a draft copy of the bill obtained by CoinDesk, the updated version of the bill now states that only those who provide digital asset transfers can be considered brokers. In other words, the language now does not explicitly include decentralized exchanges, but it also does not explicitly exclude miners, node operators, software developers or similar parties.

Under the bill, “any person who performs services that regularly effectuate the transfer of digital assets on behalf of another person” is now included in the definition.

At the heart of the issue are information reporting requirements. The initial version of the infrastructure bill did not propose a new tax on crypto transactions, but rather proposed increasing the types of transaction reports that exchanges or other market participants must provide.

This means that the bill will apply existing tax rules to a wider range of transactions. It may be difficult for certain types of exchanges (i.e. decentralized exchanges) to comply given that there is no clear operator that can provide this type of reporting.

Under the infrastructure bill’s previous wording, other parties could have been covered by the rules, such as software developers, hardware manufacturers or miners who don’t send transactions directly to customers.

Drew Nirenberg said, “This legislative language does not redefine digital assets or cryptocurrencies as ‘securities’ for tax purposes, does not infringe on the privacy of individual cryptocurrency holders, and does not force non-brokers such as software developers and cryptocurrency miners to comply with IRS reporting obligations. It simply clarifies that any person or entity that acts as a broker by facilitating transactions and accepting cash for customers must comply with standard information reporting obligations.”