- The effect on cryptocurrencies
- Реакция заинтересованных
- The US needs to work with governments around the world
- What about Russia?
In 2021, new cryptocurrency regulations have been passed, with some of them adopted as part of other legislative packages. Recently, American President Joe Biden has signed a historic $1.2 trillion infrastructure bill that involves tax reporting requirements that apply to digital assets such as cryptocurrencies.
The infrastructure package is expected to improve various aspects of the country’s infrastructure, including public transit, roads and bridges, ports and railroads, electric grids and broadband internet, water and sewage systems.
The package includes $550 billion in new investments which will be used to repair and improve the country’s ailing infrastructure, which has deteriorated due to the lack of investment.
The new bill will influence the cryptocurrency industry. As the infrastructure package requires new revenue streams, the bill will include new definitions for “brokers” among the participants of the cryptocurrency network.
Although it is claimed that the bill aims to provide the Internal Revenue Service (IRS) with clear definitions, in the end, it may require blockchain participants to provide identifying information for cryptocurrency transactions that cannot be gathered otherwise.
Justin Banon, co-founder of the decentralized network Boson Protocol, advocates for “sensible regulation for technology in order to protect consumers and users”.
According to him, “in a global economy, regulating through fear and ignorance rather than regulating with understanding will simply drive the next wave of web innovation away from the US to other jurisdictions that are implementing smart and informed regulation.”
Dr. Amber Ghaddar, a co-founder of AllianceBlock, emphasizes that the cryptocurrency industry is a new sphere, and its infrastructure is significantly different from traditional finance. She states that by enforcing the “letter of antiquated laws” and the same provisions in this new industry the government reveals its lack of understanding.
She also says that it is the fault of everyone involved since various actors have not centralized their efforts to lobby and explain to main stakeholders how the new protocols work. “We are not here to evade our taxes or launder money as some seem to believe, and it is our duty to be not only at the forefront of the conversation but its main drivers,” she says.
The fact that the new infrastructure bill has been passed may itself be quite complicated for small investors who will have to account for their digital assets in order to pay taxes. At the same time, it may be difficult to track the amounts that were initially paid for the tokens. Using the current exchange rate is not an option either since cryptocurrencies are highly volatile. Many users may face overstated tax requirements.
Moreover, the bill will amend a section of the American tax code which has certain privacy implications. It requires any business or person who receives over $10,000 in cash or a cash equivalent to report the transaction to the IRS, indicating the identity of the payer and the social security number. A violation of this rule is a criminal offense. In the case of blockchain, it may be very difficult to identify the individuals.
Russia has not yet defined its attitude towards cryptocurrencies. The government has not commented on this topic since September when Kremlin spokesman Dmitry Peskov stated that Russia did not recognize Bitcoin. However, according to the Law on Digital Financial Assets adopted in January 2021, the owner of crypto assets must pay taxes when converting them into fiat currency.
The Binance crypto exchange has analyzed the Russian legislation and the possibilities of tax authorities and concluded that the tax amount should remain at the level of 13%. Luckily, the legislators have abandoned the idea of taxing the crypto assets stored in wallets.
Still, the resentment towards the very concept of cryptocurrencies is quite obvious. In November, a court in Moscow refused to recover almost 17 Bitcoins from illegal possession. The motives for such a ruling are unclear, but it is already clear that there is quite a paradox — on the one hand, crypto owners need to pay taxes, on the other hand, Bitcoin is not considered property and thus cannot be returned to its legal owner.