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| Cryptocurrency taxes could stifle blockchain |
The Washington Post reported that Treasury Secretary Janet Yellen lobbied lawmakers to keep stricter tax provisions on cryptocurrency in the infrastructure bill.
The Biden government is boycotting a bipartisan group of senators to restrict a proposed infrastructure bill to strengthen federal oversight of cryptocurrency.
As lawmakers debate new tax reporting requirements for various parts of the blockchain system, the ongoing effort to pass a bipartisan infrastructure law could reshape the cryptocurrency world.
This shows that the White House is keen to integrate cryptocurrencies into the broader tax reporting system, even if the details of the new requirements may upset the delicate political balance of the infrastructure plan.
Right from the start, the bipartisan Infrastructure Framework authors wanted to offset the $28 billion increase in new taxes (which have been in place for more than 10 years) on cryptocurrencies.
The first draft imposed new and broad requirements for cryptocurrency brokers to report transactions as part of their tax returns. However, the original definition of media is ambiguous. It can be extended to wallet developers or miners.
Changes to a minor's proposal can waive the duty to notify. But the amendment was not accepted.
A group of lawmakers recently came up with a tougher solution that won more support in Congress. But this is causing inconvenience to many cryptocurrency proponents.
Cryptocurrency tax could kill blockchain
Proponents fear that the asymmetric reporting requirements in the amendment could lead to a permanent division between different blockchain technologies.
Most cryptocurrencies still rely on a proof-of-work blockchain like Bitcoin, which requires energy-intensive mining to prove new blockchain entries.
But the new blockchain model allows miners to collect a certain amount of currency to enter the block, followed by proof of equity, allowing for faster and more complex transactions.
Proof of Stake blockchain is not very popular yet. However, some major cryptocurrencies (notably Zcash) are considering switching to a new paradigm. Ethereum launches its own blockchain, called Ethereum 2.0 or ETH2.
Temporary changes must include minors with proof of attendance and not minors with proof of employment. Indeed, Proof of Stake mining adds complexity and financial flexibility.
However, the crypto community is concerned that additional regulatory expenditures could displace tokens from the proof-of-stake system. This stifles new innovations before they can standardize.
Many people hope that PoS systems can solve the power-hungry needs of Proof of Work mining. The amendment has been criticized as a haven for the most climate-damaging form of government-imposed encryption.