The cryptocurrency industry, however, raised questions about whether the $28 billion revenue estimate—from Congress’s official tax scorekeeper, the Joint Committee on Taxation—was accurate.
“There is certainly a spectrum from no reporting and intentional evasion, to genuine mistakes, and most people fall somewhere closer to genuine mistakes,” said Guinevere Moore, a tax litigator who represents clients investing in cryptocurrency.
Some crypto industry lobbyists called versions of the draft bill text unworkable and potentially detrimental to the industry’s growth in the U.S. They said collecting comprehensive information will be difficult if not impossible.
Compliance Questions
The senators writing the bill have yet to release a final draft of the legislation.
It’s a longstanding tradition for industries to complain about more regulations and oversight, but Congress also has a history of rushing unfinished tax ideas into legislation when it needs the revenue from the proposal to offset other spending in a given bill.
In 2015, Congress passed a new audit process for partnerships and limited liability companies because it would raise tax revenue to pay for a budget deal, even though the lawmaker developing the idea said it still had technical problems.
“This is a very complicated space, easy to get wrong, and this is why we need a real committee process to consider these issues, instead of secret drafting. We’re working on making it better,” Senator Cynthia Lummis, a Wyoming Republican who owns bitcoin, said.
Some firms in the crypto industry said it’s unclear whether they even have the ability to comply with the proposal and that if implemented, it could push part of the industry overseas.
Hardware Wallets
Enforcing the new reporting requirements for cryptocurrency is going to be extremely difficult, said Shehan Chandrasekera, head of tax strategy for CoinTracker, a company that helps people manage and calculate taxes from their cryptocurrency transactions.
Lawmakers are trying to take what worked for stocks and securities and apply those practices directly to cryptocurrency, he said. “I don’t think it’s going to work out because in the crypto world, there’s so much self-custody—a lot of people are holding their assets in a hardware wallet—and in the stocks and securities world that never happens.”
A hardware wallet is a physical device on which people store the private keys for accessing their digital assets.
It will also be tough to enforce reporting on decentralized exchanges, Chandrasekera said. Many don’t collect Social Security numbers, names, or addresses of users.
This article was provided by Bloomberg News.