Congress has again dipped its hand into a grab-bag of half-baked policies in search of “pay-fors” to finance a massive spending bill. Among the ideas they blindly pulled out and now want to slap onto “must pass” legislation is the imposition of certain financial reporting requirements on cryptocurrencies.
1/ 🚨 Here’s the deal with the US infrastructure bill:
— Jake Chervinsky (@jchervinsky) July 30, 2021
A new provision has been added that expands the Tax Code’s definition of “broker” to capture nearly everyone in crypto, including non-custodial actors like miners, forcing them all to KYC users.
This is not a drill 👇
Burdensome and excessive government reporting requirements explain much of the bloat and inefficiency in the legacy financial system, as well as why cryptocurrencies are able to attract a growing number of investors seeking higher returns and customers looking for better financial services.
Applying the same burdensome rules that have strangled innovation in the legacy financial system will only repeat past mistakes. Moreover, existing rules are not well suited for the rapid development of new technologies underway in the crypto space.
2/ Unfortunately, in the drafts we’ve seen, the category of persons who would be obligated to report is so broad that it potentially covers persons who only provide software or hardware to customers and who have no visibility whatsoever into users’ transactions.
— Jerry Brito (@jerrybrito) July 29, 2021
Instead of approaching regulation of a nascent industry in a thoughtful and deliberative fashion, spend-thrift members of Congress with zero understanding of crypto, or tech at all, are looking at the issue as nothing more than an ATM.
Crypto critics like Elizabeth Warren frequently allege that consumers need to be “protected” by politicians, but this sort of reckless approach shows why government is poorly situated to provide any such protections. Far from benefiting consumers, saddling US crypto participants with impossible obligations will drive the industry offshore where there are even fewer legal protections and little to no recourse against bad actors.
Some degree of regulatory expansion into the crypto industry is inevitable. If nothing else, there’s a lot of uncertainty regarding the degree to which certain crypto-related products intersect with existing rules, and that needs clarification. But the process for addressing these issues should be careful and thorough, not dictated by the desire for a hasty cash grab.
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Image credit: mohamed_hassan | Pixabay License.
