Earlier this week, cryptocurrency found itself at the center of a heated U.S. Congressional debate over the U.S.’s $1.2 trillion infrastructure plan.
What exactly is the connection between cryptocurrency and the U.S.’s plan to improve its roads, bridges, railways, broadband and energy usage over the next decade?
The Infrastructure Investment and Jobs Act, which ultimately passed in the Senate on Monday, originally included language to enable the Internal Revenue Service (IRS) to increase its enforcement activity for tax avoidance, which was intended to generate $100 billion over 10 years. The original language was struck by Republicans concerned about expansion of the agency’s reach. In lieu of the original language, amendments were proposed to expand regulations to “cryptocurrency brokers” which would result in requirements for brokers to set up know your customer (KYC) procedures and to report transactions to the IRS. The inclusion of cryptocurrency brokers in the bill is intended to generate an increased $28 billion in tax revenue over 10 years.
The 11th hour amendments to the bill resulted in a flurry of lobbying activity by crypto enthusiasts. The crux of the debate was over the definition of “cryptocurrency broker” which the digital asset community argued was too broad and unspecified that it could be interpreted to include anyone engaged in crypto activity, including software developers and cryptocurrency startups, who do not actually engage in any transactions.
Enthusiasts further argued that inclusion of the language in the bill could deter innovation and investment in the U.S., as well as push innovation in a blossoming industry overseas. Coinbase CEO Brian Armstrong noted on his Twitter account on Monday that “if the U.S. fails to embrace the innovation happening in crypto, it risks becoming a financial backwater, missing out on one of the fastest growing sectors of the economy.“
Some, however, like Cowen’s Jaret Seiberg, responded to the passage of the bill with optimism stating that “the tax reporting language is one of the clearest indications that Washington is prepared to accept crypto as a permanent part of the financial ecosystem.” Furthermore, this week’s debate and ultimate inclusion of language in the bill highlights the fact that crypto is evolving to be much more than a digital currency and instead is seen as “the digital infrastructure atop which the next internet will be built.”
So what does all this mean? With crypto going mainstream earlier this year, a greater regulatory focus on the industry has already been anticipated. And although the scope of KYC, anti-money laundering and reporting requirements remain unclear, it is safe to say that crypto is here to stay. With greater regulatory scrutiny on the already bullish industry, it has the potential to turn crypto-skeptics into believers, sending crypto one step closer ‘to the moon.’