Key Takeaways -
- The IRS's new proposal introduces data collection requirements for crypto service providers but excludes miners and some developers.
- Revised estimates suggest the tax revenue from these provisions is much lower than initially projected, now at $2 billion over 10 years.
- The proposal raises concerns about expanding financial surveillance in the U.S., as businesses may have to report customer information by default.
For two years, the crypto community has been on edge, waiting for the IRS to clarify its stance on the Infrastructure Investment and Jobs Act. Initially aimed at improving infrastructure, this law also had significant implications for the crypto world. The IRS has finally broken its silence with a detailed proposal, and it's time to dissect what this means for crypto users and service providers.
The IRS Proposal
The IRS recently released a nearly 300-page proposal that outlines new data collection requirements for crypto service providers. While the proposal is not as draconian as some had feared, it's far from a relief. Interestingly, miners and some software developers are off the hook for now. They have been excluded from these new requirements, at least for the time being.
When these provisions were first introduced, the Joint Committee on Taxation estimated they would bring in about $28 billion in tax revenue over a decade. However, the Biden administration later revised this figure to just $2 billion over the same period. Even Treasury officials hint that this number might be too high, indicating a shifting landscape in revenue expectations.
The Surveillance Quandary
The IRS's approach seems to set a new baseline where businesses should report customer information to the government by default. This is a concerning development, as it adds another layer to the already complex landscape of financial surveillance in the U.S. This new approach builds on existing laws like the Bank Secrecy Act and the Patriot Act, expanding the scope of financial surveillance.
Upcoming Deadlines and Responsibilities
The deadline for public comments on the proposal is set for October 30. It's crucial to consider both what the proposal explicitly states and what it omits. Ultimately, the responsibility for these sweeping changes lies with Congress, not just the IRS. They are the ones who initiated these changes, and it's up to them to either confirm or adjust them.