The $1.2 trillion infrastructure bill, which is on its way to President Biden’s desk, includes provisions to fund everything from new roads to improved broadband connections, but it also includes tax reporting provisions that people and organizations in the cryptocurrency and NFT worlds are concerned could stifle transactions.
Existing tax law, in a section of the U.S. tax code called 6050I, requires that people who receive more than $10,000 in cash and equivalents (like cashier’s checks and money orders) in many business transactions file a report with the Internal Revenue Service (IRS), including details about who paid them—such as names and Social Security numbers—or potentially face felony charges. The new law expands the definition of cash to include “digital assets” and comes as governments around the world grapple with the rapid rise of crypto and the potential for its use in money laundering. Critics worry the new provision could force participants in crypto transactions and NFT trades, which are often anonymous, to have to disclose information about the people they’re doing business with, which they simply might not have.
“Miners, stakers, lenders, decentralized application and marketplace users, traders, businesses, and individuals are all at risk of being subject to this reporting requirement, even though in most situations the person or entity in receipt is not in the position to report the required information,” warned attorney Abraham Sutherland, an adjunct professor at the University of Virginia School of Law and advisor to the Proof of Stake Alliance, an industry group, in a September report.