House Democrats Planning to Hike Tax on Crypto Assets in Infrastructure Bill

House Democrats Planning to Hike Tax on Crypto Assets in Infrastructure Bill

The trillion-dollar infrastructure bill has moved to the House to pass, and after fighting and losing in the Senate, another big fight is at the crypto industry’s door.

Citing sources with the knowledge of the plans, Politico reported that Richard Neal, chairman of the House Ways and Means Committee, is the one preparing to add these measures.

On Monday, House Democrats released a package of proposed tax increases to help pay for the White House’s $3.5 trillion spending package. Part of the $2 trillion tax hike is a proposal to add currencies, commodities, and crypto assets to the wash-sale rule, which is estimated to raise about $16 billion over a decade. The Ways and Means explainer document notes,

“This section includes commodities, currencies, and digital assets in the wash sale rule, an antiabuse rule previously applicable to stock and other securities. The wash sale rule in section 1091 prevents taxpayers from claiming tax losses while retaining an interest in the loss asset. The amendments made by this section apply to taxable years beginning after December 31, 2021.”

Under US rules, a taxpayer can’t deduct the losses from wash sales which is defined as when a security is sold and within 30 days, “substantially identical” security is then purchased. Cryptocurrencies aren’t currently subject to these rules.

The document further talks about applying constructive sales rules to digital assets, “anti-abuse rules previously applicable to other financial assets.” This rule treats “the adoption of certain offsetting positions to previously owned positions as sales of the previously owned position,” preventing taxpayers from “locking in investment gains without realizing taxable gain.”

House Democrats are also targeting wealthy Americans by proposing raising the tax rate on capital gains and qualified dividends to 28.8%, applied to stock and other asset sales that occur after Sept. 13, 2021.

According to this, starting next year, taxpayers would incur a top federal rate if their taxable income exceeds $400,000 (single), $425,000 (head of household), and $450,000 (married joint), in line with the Biden administration pledging to not raise taxes for households making less than $400,000.

The bill is expected to be revealed before the end of the month.

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Author: AnTy

National-Security Officials Warns Against Aggressive Crypto Regulation in Infrastructure Bill

National-Security Officials Warns Against Aggressive Crypto Regulation in Infrastructure Bill

National-security officials are warning that the crypto provision in the $1 trillion bipartisan infrastructure bill proposal could push illicit cryptocurrency transactions into markets where the US government has no reach, reported the WSJ.

Like some industry participants, national-security officials feel this will only add to the threat to American individuals, companies, and government agencies.

As we reported, the bill with its broad definition of “broker” that covers even miners, developers, and stakers to report the gross proceeds along with the names and addresses of the parties to the Internal Revenue Service, is currently in the House.

The IRS intends to capture billions of dollars in tax revenue through this crypto tax provision.

Given that developers, miners, and other parties do not have the required information to report, the crypto community pushed back hard against the bill and got support from some Senators.

According to crypto supporters, including market participants and now some intelligence and law-enforcement officials feel if the bill gets passed, it will drive economic activity overseas; as such, they are now “warning policy makers against overly aggressive regulations that risk exacerbating national-security hazards.”

Republican Senator from Wyoming Cynthia Lummis, an ardent supporter of cryptocurrencies and a bitcoin holder since 2013, was also involved in introducing an amendment to the bill in the Senate, which was blocked due to one single vote.

Her state has also been at the forefront of regulating the fast-evolving digital asset sector after passing crypto-friendly laws, including laying the groundwork for the chartering of Wyoming’s crypto banks, or SPDI banks — the first fully regulated financial institutions in the U.S. that hold crypto in addition to fiat currency.

“Wyoming, in fact, had so successfully innovated in this regulatory and legislative space that it was ready for prime time, in a very big way,” said Lummis in an interview, who cites Wyoming as a model for federal regulation of the $2 trillion crypto market.

According to Chris Rothfuss, a Wyoming state senator who chairs the chamber’s blockchain committee, the state needs to do something that doesn’t depend on waning industries, and “cryptocurrency provides an alternative store of value as well as the technology that diversifies our economy,” he said.

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Author: AnTy

It’s Not Over Yet! More Senators Come in Support as Crypto Continues to Fight Back

Over the weekend, the Senate voted 68-29 on the controversial bipartisan infrastructure bill to end the debate. However, the crypto community remains hopeful that the bill might get the amendment before the final vote on Tuesday. Kristin Smith, Executive Director at Blockchain Association, said,

“The Senate can do almost anything by unanimous consent (UC). So if there is a deal, we could see a compromise incorporated. So it’s not over yet.”

Senator Ted Cruz (R-TX) also spoke out in support of crypto as he tweeted, “Crypto got screwed tonight,” late on Sunday. Bypassing the bill as it is, the Senate will inflict billions of dollars of damage on the “growing & exciting” crypto industry and end up driving much of it overseas when not even a couple of Senators understand much about it, he said. Cruz tweeted,

“What the Senate said tonight: Let’s tax the hell out of something we know nothing about, so we can pass a giant bill we haven’t read and spend the American people’s money on stuff we can’t afford. It’s reckless & harmful.”

Senator Rob Portman, who helped with the creation of the bill and then later came up with his competing amendment that first excluded PoW miners and then PoS miners, also came in support of exempting miners, validators, stakers, developers, and node operators from the definition of a ‘broker’ on the Senate floor on Sunday.

While the language clarifies that the reporting requirement only covers brokers, Portman said they want to make “sure” that miners and others are exempted. He said in his remarks,

“While it’s not the intent of the underlying bill to include them, I believe we can do more to make this clear. Which is why I will continue to work with colleagues to clarify the intent of the information reporting language.”

Crypto support, Senator Cynthia Lummis updated the crypto community about all that the Senate is progressing in regards to the bill, saying,

“We’ve been able to have very productive conversations with senators on all sides of this issue, and if we could vote on amendments I think the digital asset community would be pleased with the outcome.”

The 30 hours for the amendment to need a vote is set to expire early Tuesday morning though lawmakers can unanimously agree to cut off debate earlier. If the amendment doesn’t get a vote or compromise can’t be reached, the original language will remain in the legislation.

“Tomorrow at 9 am, offices will be back in like usual. Feel free to call your senators to let us know how you think we should move forward,” said Lummis late on Sunday.

The legislation still has to clear the House, which can make changes in the bill that ultimately passes the Senate this week, giving lawmakers another chance to modify the provision. Ron Hammond, Director of Government Relations at Blockchain Association, said,

“The public pressure is working as more Senators express concerns to us privately about the bill text.”

“If there’s one thing that’s apparent, DC is shocked just how well of a fight we are putting up.”

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Author: AnTy

Developers and Miners ‘Not’ Forced to Comply, says Spokesperson of Sen. Rob Portman

Meanwhile, senators Pat Toomey and Ron Wyden are calling to “fix” crypto tax provision in the bipartisan infrastructure bill.

Senate Pat Toomey (R-Pa.) is the latest crypto supporter who announced plans to “fix” the provisions for enforcing cryptocurrency transactions into the infrastructure bipartisan bill, calling it unworkable. Toomey said in a statement,

“Congress should not rush forward with this hastily-designed tax reporting regime for cryptocurrency, especially without a full understanding of the consequences.”

He further pointed out how by including an overly broad definition of the broker, in its current form, the provision sweeps in non-financial intermediaries like miners, validators, and other service providers as well.

“These individuals never take control of a consumer’s assets and don’t even have the personal-identifying information needed to file a 1099 with the IRS.”

Toomey is also concerned that the bill would allow the Treasury Secretary to define a digital asset with broad discretion, according to an aide.

Meanwhile, late on Monday, The New York Times reported Drew Nirenberg, a spokesman for Senator Rob Portman, the Ohio Republican who helped draft the legislation, pushing back against the idea that the proposed rules would hurt the crypto industry.

“This legislative language does not redefine digital assets or cryptocurrency as a ‘security’ for tax purposes, impugn on the privacy of individual crypto holders, or force nonbrokers, such as software developers and crypto miners, to comply with I.R.S. reporting obligations.”

“It simply clarifies that any person or entity acting as a broker by facilitating trades for clients and receiving cash must comply with a standard information-reporting obligation.”

Confusing Language

The government estimates that it will raise $28 billion from these crypto provisions to fund its nearly $1 trillion infrastructure plan. This will be used as a way to offset the package’s $550 billion in new spending for roads, highways, bridges, and other infrastructure projects.

The final bill would require business transactions involving over $10k in crypto to be reported to the IRS, a mandate that already exists for large cash payments, but the problem is with the definition of “brokers” who are required to report the information to the IRS.

As we reported, even the latest tweaks in the proposal were bad, and the changed language even further broadened the scope of brokers that could include miners, validators, DEX protocols, and others. The Electronic Frontier Foundation said,

“The broad, confusing language leaves open a door for almost any entity within the cryptocurrency ecosystem to be considered a “broker”—including software developers and cryptocurrency startups that aren’t custodying or controlling assets.”

Meanwhile, the Blockchain Association and Chamber of Digital Commerce have been lobbying Senate offices to change the broker reporting pieces of the legislation.

Unintended Consequences

Senate Finance Chair Ron Wyden is another one who wants to make changes to the provisions.

According to an aide to the Oregon Democrat, changes could come in a manager’s amendment to the bill, which senators typically agree to ahead of time, reported Politico.

Over the weekend, Wyden tweeted that this infrastructure framework is not a solution to the problem of crypto tax evaders, rather “It’s an attempt to apply brick and mortar rules to the internet and fails to understand how the technology works.”

Wyden is the one who leads the chamber’s tax-writing panel and wants to make sure that the rules do not apply to those who may face difficulty complying with them, which is the problem crypto advocates have been pointing out ever since the proposal first became public knowledge.

According to an aide, Wyden supports reporting rules for crypto exchanges which the provision aims to do, but his concern is that the language lacks clarity and could mean that the developers would have to provide information to the IRS, which could “pose technological challenges and cause unintended consequences.”

Wyden has reportedly not ruled out putting forward his own amendment as a fix either.

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Author: AnTy

It’s Not About Taxes, Congress is Coming After the Entire US Crypto Industry

The unreleased infrastructure bill is the talk of the crypto town, and for a good reason, as it aims to generate $28 billion in tax revenue from the current $1.67 trillion cryptocurrency industry to help fund the nearly $1 trillion bill.

The bipartisan Senate proposal aims to amp up IRS surveillance over cryptocurrency transactions. The bill broadens the Tax Code’s definition of “broker” to cover nearly everyone in crypto, including non-custodial actors like miners, forcing them all to KYC users, explained Jake Chervinksy, General Counsel at Compound Finance. Adam Cochran of Cinneamhain Ventures commented,

“Politicians need to stop taking the paternalistic approach of trying to ban all risks and invest in the underlying problems that make people disproportionately abuse those risks.”

The definition of a “broker” is expanded in the bill to include “any person who (for consideration) is responsible for and regularly provides any service effectuating transfers of digital assets.”

Earlier drafts even covered non-custodians, including PoW miners & PoS validators. They explicitly included DEX & P2P markets covering DEX LPs, liquidators, protocol governors, and maybe even node operators or wallet developers.

The tax code requires brokers to comply with IRS reporting requirements, as per which they have to give Form 1099s to their customers & file them with the agency. To fill the form, brokers have to collect customer data, including name, address, phone number, and other information.

“As those who understand crypto already know, users are pseudonymous & access is permissionless,” said Chervinksy.

Non-custodial actors like miners have no way to get the information they need to fill the form, which in practice “could mean a de facto ban on mining in the USA,” he added.

“This sounds insane, but it really might happen. Most crypto legislation goes nowhere, so it’s easy to ignore. Not this time. This provision is part of the bipartisan & otherwise popular infrastructure bill, which is moving quickly through Congress & is highly likely to pass,” Chervinksy wrote.

He further explains that the bill can raise revenue by adding new taxes or making people pay taxes they owe, and Congress thinks crypto is all tax evaders.

“This is no way to handle major new regulations,” said Chervinsky, noting that it would either kill the crypto industry, and the policy may end up a substantial foreign policy failure as China did by cracking down on crypto mining and ended up forcing the miners out of the country.

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“The crypto provisions in the new US infrastructure bill are a disaster,” said Avichal Garg of Electric Capital. According to him, this bill would result in the departure of crypto companies from the US en masse. Garg added,

“You can’t KYC autonomous code that lives in the cloud that happens to custody crypto. The right strategy is to KYC at the fiat off ramps.”

So, what could a crypto user do here? With the provision not final yet, US citizens can reach out to their Members of Congress.

Crypto supporter Representative Warren Davidson (R-OH) also came against this bill, saying it is a departure from America’s role as someone that spearheads innovation.

“America led in the Industrial Revolution, the advent of the automobile, and the development of the internet,” Davidson said in an interview, “and now America is about to forfeit that leadership with this new technology.”

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A petition to “Stop the Senate from sneaking through total surveillance of the crypto-economy” has already been started. Chervinksy said,

“Things are moving fast, which can feel scary. But as it was with FinCEN’s proposed rule, it’s been amazing to see the entire industry come together this week to fight against this. We really do have some of the best & brightest on our side.”

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Author: AnTy

Goldman Sachs Joins Blockchain Infrastructure Company’s $28 Million Funding Round

Goldman Sachs Joins Blockchain Infrastructure Company’s $28 Million Funding Round

Blockdaemon has been acquiring many institutional clients who are starting to allow their customers to buy Bitcoin and Ether before branching out to protocols that pay interest on tokens.

Blockdaemon has raised $28 million from lead investor Greenspring Associates along with Goldman Sachs Group Inc.

BlockFi, Warburg Serres, Uphold, and Voyager Digital Ltd., were other investors in the Series A fund-raising, as per the company statement.

The firm that creates and hosts the computer nodes for the blockchain network is planning to make acquisitions and double its headcount to 100. With the latest funding, the company aims to “help institutions quickly and securely scale blockchain infrastructure.”

Over the past year, the company has seen rapid growth and gained customers, including JPMorgan Chase, Citigroup, PayPal Holdings, Robinhood Markets, and E*Trade.

“We’re selling ten times what we did a year ago, mostly to new institutions coming into the space,” said Chief Executive Officer Konstantin Richter.

In the first quarter of 2021, Blockdaemon reported a net income of $18 million and revenue at about $24 million.

Goldman Sachs, which led the $15 million investment into data provider Coin Metrics, contributed $5 million to the Blockdaemon round. “It’s been a long dialogue with them,” Ritcher said.

The CEO further shared in an interview that he’s been seeing a progression among large financial firms that starts with them allowing their customers to buy Bitcoin and Ether before branching out to protocols that pay interest on tokens to secure the network.

“Large institutions are getting serious about paying yield on tokens out to their customers,” he said. “It shows that large financial institutions over time will want to rival Coinbase” by copying its model of easier ways to buy and earn interest on various digital coins.

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Author: AnTy

Soros Fund Investing in Crypto Infrastructure Says CEO; Bitcoin Is Taking Gold’s ‘Firebase Away’

Soros Fund Investing in Crypto Infrastructure Says CEO; Bitcoin Is Taking Gold’s ‘Firebase Away’

In her “mysterious response,” Dawn Fitzpatrick refused to answer if she owns any BTC.

Soros Fund Management Chief Investment Officer Dawn Fitzpatrick revealed that the fund is making investments in the cryptocurrency industry as it sees an “inflection point” for Bitcoin and other crypto-assets.

In an interview with Bloomberg, when asked if she owns any Bitcoin, Fitzpatrick replied with a “mysterious” – “I’m not gonna answer that.”

While she didn’t reveal her personal Bitcoin holdings, she talked about her views on the cryptocurrency industry.

“We think the whole infrastructure around crypto is really interesting. We’ve been making some investments into that infrastructure, and we think that is at an inflection point. I’d say it’s everything from kind of exchange asset managers custodians to the mundane like tax reporting on your crypto gains and everything in between. We think that’s interesting.”

She further discussed how the Federal Reserve’s money printing is the factor behind Bitcoin’s success.

“We’re at a really important moment in time in that something like Bitcoin might have stayed a fringe asset. But for the fact that over the last twelve months, we’ve increased money supply in the US by 25 percent. So there is a real fear of debasing of fiat currencies.”

According to her, Bitcoin is not a currency but a commodity that’s easily storable and transferable. The IRS also classifies it as a physical asset that has a finite amount of supply. The fact that Bitcoin’s limited supply halves every four years is “interesting” to her.

“By the way when you look at gold price action in the context of a fairly robust inflation narrative of late, it’s struggled getting traction. I think that’s because Bitcoin is taking some of its firebase away.”

Regarding the central bank launching their own digital currencies (CBDC), Fitzpatrick said they are going to be here and even “quicker than people expect.” China is currently leading the race for CBDC as it has already run several digital yuan trials for a while now.

“There are some strategic reasons why they are going to be a first mover. And I do think from a geopolitical perspective; they want to use that digital currency too. They want that to be used around the world. And it is a potential threat to other bitcoin and crypto.”

While she thinks CBDCs are a “real threat” to crypto, it will only be “temporary,” as they won’t be successful in “permanently destabilizing Bitcoin,” she said.

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Author: AnTy

IDEX to Roll Out Multi-Chain Solution; Starting With Polkadot & Binance Smart Chain

  • IDEX, a popular decentralized exchange (DEX), plans to expand its infrastructure into two extra blockchains, adding its Ethereum (ETH) implementation.

In an announcement shared with BEG, IDEX confirmed a multi-chain solution expansion program that will integrate the decentralized exchange’s infrastructure to Polkadot and Binance Smart Chain (BSC). The latest move aims to expand the possibilities of traders on the platform to tokens, staking programs, and swaps across the blockchains.

IDEX is a layer-2 blockchain solution that combines the non-custodial security of a decentralized exchange while offering a centralized exchange speed and convenience. IDEX runs all of its operations on the Ethereum blockchain and plans to give every IDEX token holder on the ETH blockchain a similar number of tokens on the newly expanded chains.

As Ethereum faces huge gas costs and scalability issues with the rise of the DeFi market, new smart contract platforms such as Polkadot are coming up to offer users faster and cheaper platforms for developers to build their DeFi apps. In a statement on the expansion program, IDEX CEO Alex Wearn stated the expansion program aims to “give customers new networks to complete trades.”

Ethereum is facing tough competition from other blockchains, even in light of the ETH 2.0 Beacon chain launch, expected next week. However, we are stated that the latest move by IDEX to Polkadot and Binance Smart Chain is a diversification tactic rather than a competitive stance as the DEX aims to “put a stake in the ground and plant our [IDEX] flag early.”

The implementation of IDEX will happen on Polkadot Layer 0, meaning that the exchange will connect to a parallel chain (parachain) to Polkadot’s blockchain. IDEX will be integrated on Binance Smart Chain Layer 1, enabling traders to tap into BSC’s centralized DEX ecosystem directly.

The new tokens will be distributed to IDEX users on Ethereum starting December 7, trading on BSC and Polkadot, expected to start in Q1 2021. Tokens that are not claimed promptly will be transferred to a community fund for uses promoting the development of IDEX.

Wearn further stated the decentralized exchange is working on adding new blockchains in the future but is currently working with Polkadot and BSC because both are currently compatible with the Ethereum Virtual Machine (EVM). He further said,

“As these platforms grow, we’ll see increased demand for trading these assets and a need for non-custodial trading solutions that support these networks.”

To enhance the cross-chain network that will provide a one-stop-shop allowing different assets to be traded on its platform, IDEX will offer independent assets across each blockchain. Binance Smart Chain and Polkadot will start with the tickers IDXB and IDXP, respectively.

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Author: Lujan Odera

‘Large-Scale’ Crypto Exit Scams Detected in Estonia’s E-Residency Program

Estonia had granted foreigners remote access to its digital infrastructure through its e-residency program, which is now linked to cryptocurrency frauds abroad.

Amidst Europe working on improving its anti-money laundering rules, with EU banking watchdog calling for a single set of regulations after going through several related scandals, companies headed by Estonian e-residents have been involved in “a few large-scale exit scams,” where clients are unable to withdraw their assets.

The police’s Finance Intelligence Unit form last week said these companies that are registered overseas are also linked to organizing “suspicious initial coin offerings and the misappropriation of large sums within them.”

The Baltic nation’s reputation recently got a hit after seeing Europe’s biggest scandal with Danske Bank accused of funneling $230 billion in illicit funds through the Estonian branch.

Estonia, which has a 1.2 million population, has also been seeing the issuance of digital IDs, a program that started in 2014, to e-residents down from the 2018 peak, having already issued 70,000 from 174 countries.

In June this year, the nation also canceled the licenses of 500 crypto firms, 30% of the total, as part of the clampdown on illicit financial flows.

Still, a new set of frauds have been detected. Officials had warned earlier that the e-residency program, allowing non-residents to run businesses from abroad, needed changes to avoid criminal abuse and improve its security.

Police have also moved to curb down on companies that exchange and help clients hold digital currencies.

The e-residency team is currently working “hand in hand” with the police and the FIU. “The survey doesn’t show that all fraudsters have been e-residents, but that there have also been e-residents among fraudsters,” said its head Ott Vatter.

According to the police, a “considerable connection” with e-residents is raising the risk of reputational damage in the crypto sector of Estonia, where about a third of companies, 554, providing crypto services have at least one e-resident as a related party.

Compared to 1,234 companies with cryptocurrency licenses at the end of last year in the country, as of August, there were only 353.

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Author: AnTy

Bison Trails Launches Validator Support For Smart Contract Platform, NEAR Protocol

In an announcement released on June 9, 2020, Bison Trails, an infrastructure as a service platform, announced the addition of NEAR Protocol validator support. As a member of the NEAR Protocol Advisory board, Bison Trails aims at easing the transition of NEAR protocol nodes through the integration of its Proof of Authority (PoA) consensus mechanism and the “Restricted Mainnet” scheduled to launch next quarter.

CEO at Bison Trails, Joe Lallouz, statement on the NEAR Protocol integration acquired by BEG reads,

“We are excited to support the NEAR team as they launch the protocol. I’ve been following the team at NEAR for some time now and am blown away by their focus on the developer experience.

NEAR’s incredible technical team understands building a strong developer ecosystem will help drive success.”

Bison Trails Supports NEAR Protocol Validators

The NEAR Protocol is a proof of stake (PoS) decentralized app that enables the management of high-value assets to give the power of open finance and open web to the user. The system employs a PoA consensus mechanism that delegates the power to approve and verify transactions to validators.

Anyone can become a validator on NEAR Protocol but for those who do not wish to be one, Bison Trails offers its platform to run the node on the users’ behalf.

According to the statement, any participant who runs their nodes on the Restricted Mainnet will be awarded a stipend while the validators “warded special voting rights.” It reads,

“The voting power of these validators will be magnified in the community stage by having the additional delegated tokens on the validator.”

NEAR Protocol also adopts dynamic sharding, which means the number of shards changes in response to usage demands, scaling up and down, in a bid to increase scalability on the platform. The system is yet to be built on to the platform but Bison Trails stated they will be supporting the NEAR’s sharding – as it also helps in Bison’s scalability.

Future of NEAR Protocol

Bison Trails and NEAR Protocol have worked together since March 2019, when the latter become the first company to launch NEAR’s testnet. The co-founder of NEAR Protocol, Illia Polosukhin, believes Bison Trails will provide mentoring and further development on their validator program in the future. On the partnership between the two blockchain firms, Illia said,

“Bison Trails has been at the forefront of what is now considered the professional validator industry, making participation in blockchain networks more accessible and helping to provide more high-quality operators to the network.”

NEAR Foundation, the development lead on the platform, in May announced a $21.8 Million funding led by VC firm, a16z, in its plan to launch the mainnet. Illia said the company will be moving into layers 1, 2, and 3 in the summer of 2020 in preparation for the Restricted mainnet.

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Author: Lujan Odera