On January 26, 2022, eleven US representatives wrote to US Treasury Secretary Janet Yellen in response to the Infrastructure Investment in Jobs Act’s definition of a “broker”, which they claimed was not fairly applicable to the nature of work carried out in the crypto industry.
The Broadly Defined “Broker”
The Act outlined that brokers would be required to collect detailed information about their customers and their trades, with those participating in crypto and the blockchain network included in the “broker” definition. It would have imposed unnecessary tax reporting burdens on crypto miners and stakers who don’t usually deal directly with their customers and do not have ready access to such information.
Crypto Miners and Stakers To Be Exempt
The US Treasury Department has since addressed these concerns, and on February 11, 2022 responded with a letter that indicated crypto miners and stakers will not be subject to the tax reporting requirements that will be implemented on exchanges.
The Treasury implied that the requirements would pertain only to those who already have access to and use such detailed customer information: “Existing regulations impose broker reporting obligations only on market participants engaged in business activities that provide them with access to information about sales of securities by taxpayers.”
The letter, written by Jonathan Davidson, an assistant Treasury secretary for legislative affairs, further clarified that “ancillary parties who cannot get access to information that is useful to the IRS (Internal Revenue Service) are not intended to be captured by the reporting requirements for brokers.”
This clarification comes as a relief to active members in the crypto industry, considering that an overly broad definition could be impossible for many participants to act in accordance with.
Proposed Regulations and Next Steps
The U.S. Treasury Department plans to issue additional proposed regulations that will reflect how a broker is defined. This issuance will follow a rulemaking process similar to those followed for other regulations that are implemented at the federal level.
The crypto industry collectively made its concerns surrounding the Infrastructure Investment in Jobs Act’s broker definition heard, and these concerns were thus acknowledged and acted on. There are significant implications to be drawn here, pertaining to the role and presence of crypto actors becoming legitimized for future legislative decisions, especially when it comes to crypto activity.
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