Thread by @jchervinsky

1/ 🚨 A full update on the infrastructure bill:

President Biden signed the bill into law on Monday. The crypto tax provisions are officially set to take effect on January 1, 2024 (for FY2023 reporting).

Several members of Congress have already proposed new bills to fix this 👇

2/ As a reminder, the infrastructure bill imposed tax reporting requirements on an unknown but possibly massive number of actors in crypto, even where compliance is impossible.

This could include miners, validators, software developers, wallet providers, NFT creators, & more.

3/ The bill has three main flaws:

- the broker definition, which could force nearly everyone in crypto to do tax reporting
- the digital asset definition, which could apply to anything on a blockchain
- the cash transaction report expansion, which is the infamous 6050I provision

4/ The broker definition reads:

“any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.”

This is wildly overbroad & vague. Who does this even apply to? Can you tell? I can't.

5/ The digital asset definition reads:

“any digital representation of value...recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary.”

That is, anything on a blockchain, no matter if reporting it makes sense or not.

6/ The infamous 6050I provision forces businesses to report all digital asset transactions worth more than $10k, using the same “anything on a blockchain” digital asset definition. Yes, NFT creators might become tax reporters.

@coincenter has more here:
coincenter.org/an-unworkable-…

7/ To be clear, everyone in the crypto industry agrees that folks should pay whatever taxes they owe.

Our objection is that the bill treats everyone—even small businesses—as if they were financial institutions, & imposes obligations for which compliance is literally impossible.

8/ The bill also massively expands the government’s warrantless surveillance regime, places an unacceptable burden on the right to privacy, & creates unnecessary new cybersecurity risks by exposing sensitive information to a potential data breach.

This is bad policy, full stop.

9/ Thankfully, many members of Congress agree.

A large, bipartisan group understands that the bill is unworkable in its current form & are dedicated to crafting a legislative solution. A lot has happened already just this week.

Here's where we stand in both the House & Senate:

10/ In the Senate, @SenLummis & @RonWyden introduced a bill on Monday that looks a lot like the compromise amendment we rallied for in August.

It doesn't change the bill's bad language. Rather, it adds a "rule of construction" to narrow the bill's scope.
bloomberg.com/news/articles/…

11/ Senators Lummis & Wyden were our champions back then, & we owe them a debt of gratitude.

Yet, in my view, although this language was the best we could do in a bad situation, it isn't ideal.

I'd rather not settle for a rule of construction now. Let's try to do this right.

12/ On the other end of the spectrum, @TedCruz introduced a bill Tuesday to repeal the tax provisions entirely. Perfect, right?

Sadly, no. No matter how much we like this bill, the political reality is Congress won't pass it & the President won't sign it.

https://twitter.com/TexasCrypto1/status/1460634111371063297?s=20

13/ That brings us to the House, where the real action is.

To start, 10 Democratic members led by @RepDarrenSoto & @RepRoKhanna wrote a letter to @SpeakerPelosi on Monday urging her to promote innovation & support a fix.

The letter is great. Read here:

https://twitter.com/RepDarrenSoto/status/1460732676411957256?s=20

14/ Then today, a bipartisan group led by @PatrickMcHenry & @RepTimRyan (plus @RepTomEmmer, @RepDarrenSoto, @WarrenDavidson, @RoKhanna, @RepTedBudd, @RepSwalwell, @RepAGonzalez, & @RepKevinBrady) proposed a comprehensive fix.

This is the one, you guys! 🔥

https://twitter.com/PatrickMcHenry/status/1461372184769662977?s=20

15/ The bill limits the broker definition to any person who “stands ready in the ordinary course of a trade or business to effect sales of digital assets at the direction of their customers.”

This clearly excludes miners, developers, & others who can’t—& shouldn’t—report.

16/ The bill amends the digital asset definition by eliminating the Treasury Secretary's authority to expand the definition even further.

That’s a good change. The definition is still pretty much “anything on a blockchain,” but the impact isn’t nearly as bad, especially since...

17/ ...the bill totally eliminates the 6050I provision, replacing it with an order for Treasury to do a study on the effect of expanding the cash transaction reporting requirement.

This is the exact right result. Thanks to @PatrickMcHenry & @RepTimRyan for their awesome work! 👏

18/ I’m hopeful that the McHenry/Ryan bill has a chance to pass Congress, but it'll be tough.

Remember, the crypto tax provisions only passed in the first place because they were tacked onto must-pass legislation at the last minute.

We don't have that advantage, but we'll try.

19/ The fight doesn’t stop here, either.

No matter what happens in Congress, Treasury will eventually do public notice-and-comment rulemaking to define the scope of the new reporting requirements.

We—all of us—will have an opportunity to make our voices heard. We will be LOUD.

20/ Treasury will hopefully be guided by the statements of Sen. @MarkWarner & @SenRobPortman on the Senate floor in August.

They clarified that the reporting requirements shouldn’t apply to miners, validators, & others who don't play the role of brokers: portman.senate.gov/newsroom/press…

21/ If not, as you might hear me say often, we’ll pursue an appropriate remedy in the courts.

We’ll also focus on next year’s midterm elections, to make sure Congressional candidates know how many of their constituents care deeply about this issue.

Onward. Stay tuned. 🙏

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