Crypto Regulation Will Help Pay for Infrastructure Bill, SEC’s Gensler Compares Industry to ‘Wild West’
The 2,700-page text of the $1 trillion Infrastructure Investment and Jobs Act, which was unveiled Sunday night by a bipartisan group of senators, includes a provision about the crypto industry. The provision, aimed to help pay for a part of the bill, is making some insiders nervous about new regulatory requirements, which might be stifling. In addition, Securities and Exchange Commission Chair Gary Gensler addressed crypto regulations today at the Aspen Security Forum, saying that “right now, we just don’t have enough investor protection in crypto. Frankly, at this time, it’s more like the Wild West.”
The infrastructure bill’s provision broadens the definition of broker, saying “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person,” according to the text of the bill. CNBC reports that this language would require crypto brokers to report customer information to the Internal Revenue Service, and that it doesn’t exclude miners, software developers, stakers and other individuals in the crypto economy who don’t have customers.
Ron Geffner, former SEC enforcement lawyer who now oversees the Financial Services Department at Sadis & Goldberg, tells GOBankingRates that “the proposed language which will enhance the IRS’s access to information and its ability to tax those persons profiting from digital currencies is a forgone conclusion.”
“Expect other countries to act in similar fashion. The long arm of the tax person will always follow profits made in any industry,” Geffner adds.
This is also explained in the White House fact sheet, which explains that part of the $1 trillion infrastructure bill will be “financed through a combination of redirecting unspent emergency relief funds, targeted corporate user fees, strengthening tax enforcement when it comes to cryptocurrencies, and other bipartisan measures.”
Senator Rob Portman (R-Ohio), one of the main proponents of the provision, said in April that the idea is to have better information reporting on cryptocurrency and to define it better for tax purposes.
Following the unveiling of the bill on Sunday, Senator Ron Wyden (D-Ore.) said in a tweet that “Americans avoiding paying the taxes they owe through cryptocurrency is a real problem that deserves a real solution. The Republican provision in the bipartisan infrastructure framework isn’t close to being that solution. It’s an attempt to apply brick and mortar rules to the internet and fails to understand how the technology works.”
The Republican provision in the bipartisan infrastructure framework isn’t close to being that solution. It’s an attempt to apply brick and mortar rules to the internet and fails to understand how the technology works.
— Ron Wyden (@RonWyden) August 1, 2021
As of Monday, cryptos are worth about $1.6 trillion, with 77 tokens worth at least $1 billion each and 1,600 with at least a $1 million market capitalization, Gensler said today at the Aspen Security Forum.
Before starting at the SEC, Gensler taught at the Massachusetts Institute of Technology, including courses on crypto finance and blockchain technology.
“As a personal matter, I wouldn’t have gone to MIT if I weren’t interested in how technology can expand access to finance and contribute to economic growth,” he said in his speech. “But I am anything but public policy-neutral. As new technologies come along, we need to be sure we’re achieving our core public policy goals.”
Gensler added that “this asset class is rife with fraud, scams and abuse in certain applications. There’s a great deal of hype and spin about how crypto assets work. In many cases, investors aren’t able to get rigorous, balanced and complete information. If we don’t address these issues, I worry a lot of people will be hurt.”
Gensler also addressed crypto exchange traded funds, as investors and investment managers have anxiously been awaiting a decision from the SEC on the approval of Bitcoin ETFs. These would have to be traded on the “exchange” — in other words, on the stock market (and therefore, only during the hours the stock market is open). Right now, cryptos don’t have any such limitations and can be traded anytime. While several companies have filed crypto ETFs with the SEC, the Commission has either rejected or delayed its decisions on many of them.
“I anticipate that there will be filings with regard to exchange-traded funds (ETFs) under the Investment Company Act (’40 Act). When combined with the other federal securities laws, the ’40 Act provides significant investor protections. Given these important protections, I look forward to the staff’s review of such filings, particularly if those are limited to these CME-traded bitcoin futures,” Gensler said.
Ric Edelman, founder of the Digital Assets Council of Financial Professionals, tells GOBankingRates that “the new legislation and comments from SEC Chair Gary Gensler are very welcome. Regulatory and tax law clarity, along with consumer protection, are essential in order for mainstream investors to feel comfortable investing in this new asset class. At DACFP, we are happy to assist in these efforts.”
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Last updated: August 3, 2021