For two years, the cryptocurrency world has been waiting to see how the Internal Revenue Service (IRS) would implement the Infrastructure Investment and Jobs Act. Put simply, this law established new reporting requirements that risked setting a de facto ban on cryptocurrency mining and exposing millions of Americans to new felony crimes. The good news is that the IRS’s nearly 300-page proposal is not quite as bad as it could have been under the law. However, that is far from saying it is good policy.
As citizens, companies, and consultants finish crafting their comment letters ahead of the October 30 response deadline, it’s important to take a step back and recognize why businesses should not be required to report customers to the government by default.
Recalling back to 2021, the Infrastructure Investment and Jobs Act was about building roads, bridges, and the like — it was not about cryptocurrency or financial reporting. It wasn’t until funding was desperately needed to offset spending that members of Congress slipped in two provisions to increase financial surveillance over cryptocurrency users. Their argument was that increasing surveillance would increase tax revenue, effectively accusing cryptocurrency users of tax evasion.
The $28 billion figure was questionable at the time. And less than a year later, the Biden administration released its budget, which contained a vastly different estimate. In contrast to the $28 billion estimated by the Joint Committee on Taxation, the Biden administration estimated that only $2 billion would be received over the next 10 years. And now, even that number might be an overestimation as Treasury officials acknowledged that the estimates were based on a very different market.
With cost-offsetting out the window, what is left appears to be little more than another brick in the wall of U.S. financial surveillance.
The IRS’s proposal, again, doesn’t seem as bad as it could have been since the proposal does exclude miners and some software developers for now. Still, the proposal chooses a concerning path for deciding who should be required to report customers.
The premise seems to be partly based on “whether a person is in a position to know information about the identity of a customer, rather than whether a person ordinarily would know such information.” The proposal states that this distinction is made because some platforms “have a policy of not requesting customer information or requesting only limited information [but] have the ability to obtain information about their customers by updating their protocols.” For this reason, the proposal states that the IRS expects some decentralized exchanges and selfhosted wallets may be forced to report their customers’ private information.
The IRS reports 1,726 comments received so far.
Those are rookie numbers.
Unless you want:
– Every crypto site and wallet to have your SSN, and
– Nodes, devs, governance, & LPs to be brokers in technical noncompliance,
In other words, even though businesses may have no reason to collect sensitive, personal information from customers, the baseline that the IRS is working with is whether they have the ability to do so. That may be somewhat limited given the focus is on businesses providing a service, but “the ability to collect information” seems to be little more than “collection by default.”
While concerning, this approach should not come as a surprise. The U.S. government has slowly been establishing broader financial reporting requirements with the Bank Secrecy Act, the Patriot Act, and many other laws and regulations. The provisions in the Infrastructure Investment and Jobs Act and the resulting proposal from the IRS are just the latest iteration of this expansive framework.
Yet rather than continue to expand the range and depth of financial surveillance, now should be the time to question the premise as a whole. In a country where Americans are supposed to be protected by the Fourth Amendment, businesses should not be forced to report their customers to the government by default. Activities like using cryptocurrency for payments, receiving over $600 on PayPal after a garage sale, or getting a paycheck from a job should not put you on a government database.
Steering away from this surveillance status quo might require fundamental changes to U.S. law, but that’s not to say doing so is a radical idea. When surveyed by the Cato Institute, 79 percent of Americans said that it is unreasonable for banks to share financial information with the government and 83 percent said that the government should need a warrant to obtain financial information.
It is those principles that should guide the discussion forward. So, while the October 30 response deadline is just around the corner, commenters should weigh both what the proposal does and doesn’t say.
Furthermore, although the present focus is very much on the IRS, let’s not forget that the responsibility to fix both the current situation and the larger financial surveillance status quo lies in the halls of Congress. At the end of the day, the IRS is doing what Congress told it to do. So, it’s Congress that needs to step in to reform the system as a whole.
Nicholas Anthony is a policy analyst at the Cato Institute’s Center for Monetary and Financial Alternatives. He is the author of The Infrastructure Investment and Jobs Act’s Attack on Crypto: Questioning the Rationale for the Cryptocurrency Provisions and The Right to Financial Privacy: Crafting a Better Framework for Financial Privacy in the Digital Age.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Lisa Nandy has said Sir Keir Starmer’s decision to accept thousands of pounds worth of football tickets was “very sensible”.
The minister for culture, media and sport also said she had never accepted free clothes from a donor.
Speaking to Sky News at the start of the Labour Party conference today, the MP for Wigan said: “The problem that has arisen since [Sir Keir] became leader of the opposition and then prime minister is that for him to sit in the stands would require a huge security detail, would be disruptive for other people and it would cost the taxpayer a lot of money.
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PM ‘pays for his season ticket’
“So I think he’s taken a very sensible decision that’s not the right and appropriate thing to do, and it’s right to accept that he has to go and sit in a different area.
“But I know that he’d much rather be sitting in the stands cheering people on with the usual crowd that he’s been going to the football with for years.”
Ms Nandy also said while she has not accepted free clothes – joking “I think you can probably see that I choose my own clothes sadly” – she doesn’t “make any judgements about what other members of parliament do”.
She said: “The only judgement I would make is if they’re breaking the rules, so they’re trying to hide what they’re doing. That’s when problems arise.
“Because the point of being open and transparent is that people can see where the relationships are, and they can then judge for themselves whether there’s been any undue influence.”
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She asserted there had not been an undue influence in gifts accepted by senior Labour figures, adding: “We don’t want the news and the commentary to be dominated by conversations about clothes.
“We rightly have a system, I think, where the taxpayer doesn’t fund these things. We don’t claim on expenses for them. And so MPs will always take donations, will always take gifts in kind.
“MPs of all political parties have historically done that and that is the system that we have.”
She added: “I don’t think there’s any suggestion here that Keir Starmer has broken any rules. I don’t think there’s any suggestion that he’s done anything wrong.
“We expect our politicians to be well turned out, we expect them to be people who go out and represent us at different events and represent the country at different events and are clothed appropriately.
“But the point is that when we accept donations for that or for anything else, that we declare them and we’re open and transparent about them.”
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The announcement followed criticism of Sir Keir’s gifts from donors, which included clothing worth £16,200 and multiple pairs of glasses worth £2,485, according to the MPs’ register of interests.
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Sir Keir was found to have received substantially more gifts and freebies than any other MP – his total in gifts, benefits, and hospitality topped £100,000 since December 2019.