While a proposal to increase tax obligations to Bitcoin actors brews in the senate, Yellen lobbies against Bitcoin in the background.
In July, the White House and Sen. Rob Portman (R-Ohio) agreed to a proposal that would require increased tax obligations for bitcoin “brokers” as a means to help fund the bipartisan infrastructure bill. However, the dubious definition the deal brings on what a “broker” would be in the Bitcoin network spurred criticism and revolt.
Under the original proposal terms, developers of free, open-source software (FOSS) in the Bitcoin space, bitcoin miners, node operators, and hardware wallet manufacturers would be considered “brokers” and thus demanded to abide by the new requirements.
The initial plan, crafted by Portman with the help of Treasury Department officials, aims to increase tax revenue from bitcoin and cryptocurrency transactions by effecting two changes. The first would require bitcoin payments worth more than $10,000 to be reported to the U.S. Internal Revenue Service (IRS). The second would require “brokers” in the bitcoin space to file a 1099 form for transactions with BTC and other cryptocurrencies. Here’s where the confusing definition of “broker” comes in.
Although actual bitcoin brokers – regulated bitcoin exchanges such as Coinbase – could realistically file 1099 forms in such circumstances, the proposal would also require filing by a wide range of actors in the Bitcoin space. But software developers, miners, node operators, hardware wallet manufacturers, Lightning channels, and others cannot obtain the necessary information for filing the 1099 forms – they do not know who their users are.
As a result, the Biden administration would end up crippling the growth of the Bitcoin network, the adoption of bitcoin the currency, and innovation on all the associated industries and firms.