1) More last minute updates on the crypto tax bill!
For context:
For context:
https://twitter.com/SBF_FTX/status/1423425215925604360
2) Last we checked in, @RonWyden / @SenLummis / @SenToomey had proposed an amendment removing blockchain/DeFi infrastructure.
This was great!
It is totally reasonable to have 1099 reporting reqs for e.g. @ftx_us / @CoinbasePro.
But nodes, developers, wallets, etc. can't.
This was great!
It is totally reasonable to have 1099 reporting reqs for e.g. @ftx_us / @CoinbasePro.
But nodes, developers, wallets, etc. can't.
3) And to be clear, it's not just that they *don't want to* report people's taxes.
They *can't* do it, because they don't actually have any private information.
All they're doing is providing tooling and/or propagating the blockchain.
They don't know who is using DEXes!
They *can't* do it, because they don't actually have any private information.
All they're doing is providing tooling and/or propagating the blockchain.
They don't know who is using DEXes!
4) At least, not any more than a third party software provider could, if e.g. Chainalysis wanted to try their hand at it.
That's one of the weird, interesting, powerful parts of blockchains: the parties that propagate blocks are *not* given special info, don't have customers.
That's one of the weird, interesting, powerful parts of blockchains: the parties that propagate blocks are *not* given special info, don't have customers.
5) And so the bill was in a reasonable state: language to help prevent underreporting of crypto gains, correctly aimed at the parties with the information/knowledge/customer relationships to report it.
6) Now, there's a new amendment, and it's... odd.
Clearly, it applies to centralized US exchanges, which is reasonable!
First, rather than clarifying that this doesn't apply to nodes propagating blockchains, it only referenced proof of work.
Clearly, it applies to centralized US exchanges, which is reasonable!
First, rather than clarifying that this doesn't apply to nodes propagating blockchains, it only referenced proof of work.
7) So, under this amendment, proof of work chains (e.g. BTC) which algorithmically validate blocks without private information wouldn't be responsible for guessing what transactions customers are doing in crypto.
But if a blockchain uses a PoS protocol, then it would be.
But if a blockchain uses a PoS protocol, then it would be.
8) It's hard to see why this distinction would be relevant here. ETH miners aren't in the exchange business and don't have private customer or trade info.
Once ETH2.0 comes out, ETH nodes... still won't be exchanges or have private customer or trade info.
Once ETH2.0 comes out, ETH nodes... still won't be exchanges or have private customer or trade info.
9) But the explicit exemption of PoW creates an implication that PoS *would* trigger requirements.
This isn't about PoS miners being lazy or hating tax.
They propagate public, decentralized, general ledgers. They don't know what trades people do any more than the public does!
This isn't about PoS miners being lazy or hating tax.
They propagate public, decentralized, general ledgers. They don't know what trades people do any more than the public does!
10) So their choices, basically, would be:
a) shut down
b) move out of the US
They couldn't choose to comply even if they wanted to.
So the impact would just be to force crypto infrastructure and innovation offshore.
a) shut down
b) move out of the US
They couldn't choose to comply even if they wanted to.
So the impact would just be to force crypto infrastructure and innovation offshore.
11) (And I don't particularly want to wade into this argument, but I _will_ note that this would pressure chains towards the methods that the same parties worry are more energy/carbon intensive. Though I think that there are plenty of ways to mitigate! ftx-climate.com)
12) Overall I think that the proposal with the prior amendment was a positive, constructive regulation that would help enforce tax reporting.
Which is totally reasonable, and again, as an owner of @ftx_us--a business clearly hit by it--we'd be totally happy to comply!
Which is totally reasonable, and again, as an owner of @ftx_us--a business clearly hit by it--we'd be totally happy to comply!
13) So, other than @RonWyden / @SenLummis / @SenToomey and all the other Senators in favor of their amendment, who _else_ is taking a clear, constructive approach towards crypto regulation?
Honestly, I think that the @CFTC has a pretty good track record here.
Honestly, I think that the @CFTC has a pretty good track record here.
14) I know this isn't something I've made clear historically (among other things I think I was too pessimistic before!).
But the CFTC has:
a) made it clear that crypto, and crypto derivatives, can fit in their existing frameworks
b) Shown a good understanding of the industry
But the CFTC has:
a) made it clear that crypto, and crypto derivatives, can fit in their existing frameworks
b) Shown a good understanding of the industry
15)
c) Provided guidance where appropriate, and otherwise shown interest in learning
@CFTCquintenz, @CFTCberkovitz, etc. have been thoughtful, as I'm sure have many others:
unchainedpodcast.com/can-a-defi-sma…
c) Provided guidance where appropriate, and otherwise shown interest in learning
@CFTCquintenz, @CFTCberkovitz, etc. have been thoughtful, as I'm sure have many others:
unchainedpodcast.com/can-a-defi-sma…
16) So what's next?
I don't know, we'll see.
But, hopefully, we can move forward with reasonable, sturdy regulations, while making sure that they make sense in the context of the function and power of the technology.
I don't know, we'll see.
But, hopefully, we can move forward with reasonable, sturdy regulations, while making sure that they make sense in the context of the function and power of the technology.
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