US Treasury to Ease Crypto Concerns by Clarifying A ‘Broker’ Doesn’t Include Those Without Transaction Data: Report
The US Treasury Department is set to clarify what exactly entails “broker” for the purpose of reporting to the Internal Revenue Service after the crypto tax provision of the controversial $1 trillion bipartisan infrastructure bill was passed in its original form that overreaches to cover miners, developers, stakers, and validators to report information on clients to the IRS.
The tax provision is estimated to raise $28 billion over a decade.
The Treasury will clarify that only cryptocurrency companies it considers brokers will need to comply with the proposed IRS reporting requirements. Developers, miners, and hardware and software providers won’t be covered, so long as they don’t act as brokers, reported Bloomberg citing an unnamed Treasury official.
Instead of granting blanket exemptions, Treasury’s guidance would rather focus on how the firms identify themselves. Whether their activities qualify as a broker under the tax code, the official added.
The guidance that could address some concerns of the crypto industry is expected to be made public as soon as next week.
As we reported, two amendments and then a compromise was discussed to remove these parties from reporting only for a lone senator Richard Shelby to end all the development. The original overreaching bill has now made its way to the House, where the crypto community will again work on having a clear definition of a ‘broker.’
The new reporting rules, however, even if signed into law, won’t go into effect until 2023.
We can't just shoehorn new technology into century-old policy frameworks. We need to think from first principles, or else every livestreamer in the world would have needed a television broadcast license.https://t.co/X2aHkZGbX8
— Balaji Srinivasan (@balajis) August 14, 2021
During the Senate voting on these amendments, even Treasury Secretary Janet Yellen expressed her support for them. Yellen said in a statement,
“I am grateful to Senators Warner, Portman, Sinema, Toomey, and Lummis for working together on this amendment to provide clarity on important provisions in the bipartisan infrastructure deal that will make meaningful progress on tax evasion in the cryptocurrency market. I am also thankful to Chair Wyden for his leadership and engagement on these important issues.”
Yellen’s support for the amendment came despite her attempt to have more regulatory control over the $2 trillion cryptocurrency industry.
Last month, she summoned the OCC, FDIC, and the President’s Working Group (PWG) on Financial Markets to assess the potential benefits of stablecoins while mitigating their risks.
Earlier this year, she said she is “not a fan” of crypto as many are used “mainly for illicit financing” and that they need to “curtail their use, and make sure that anti-money laundering doesn't occur through those channels.”
The IRS was already drafting rules along these lines, but they wanted Congress to pass this legislation so as to make their authority in this space ironclad, to help head off litigation from the crypto industry. 2/x
— Victoria Guida (@vtg2) August 13, 2021
Now, the Treasury seems to be taking steps towards easing some of the crypto industry's concerns.
The Treasury official told Bloomberg that some of these concerns were valid but that much of the lobbying limited the Treasury Department’s authority to collect legitimate tax information. But the department isn’t looking to go after businesses who don’t have transaction data, the official added.
It will give more clarity as to how the Treasury would apply the definition of a broker to entities that transfer crypto assets on behalf of another person.
These latest efforts by the agencies are also part of a broader push by the Treasury to crack down on crypto tax evaders, as IRS Commissioner Chuck Rettig has said that it is a key contributor to the growing gap between what’s owed in taxes and what the IRS actually collects.