US Lawmakers Plan to Reintroduce a Bill Aimed at Fixing Crypto Reporting Standards

A section of the US legislators is planning to reintroduce a bill that aims to amend the current provisions in the law on how cryptos are treated for tax purposes to protect innovation in the digital assets space.

The ‘Keep Innovation in America Act,’ introduced in 2021 as part of the provisions for digital assets in the bipartisan infrastructure bill, is co-sponsored by Representative Patrick McHenry, the chair of the House Financial Services Committee, who took over from Rep. Maxine Waters in January, and Ritchie Torres (D-New York).

The current law – which defines a crypto broker as ‘any individual who (for consideration) stands ready in the ordinary course of a trade or business to effect sales of digital assets at the direction of their customers – is hindering innovation in the sector according to the legislators. The reporting standard requires the players in the digital asset space to comply with standards not consistent with the technology’s operation, they said.

‘‘The reporting requirements under current law require digital assets market participants to adhere to standards that are incompatible with this technology’s operation. This will hinder the development of digital assets and its underlying technology in the United States, shifting its development outside the United States,’’ the bill read.

Reporting requirements

According to the bill, the need for brokers to report any digital asset transaction worth more than $10,000 to the Internal Revenue Service should be reviewed. Besides, it proposes that miners, validators, hardware and software developers, and protocol developers, should not be categorized as brokers.

When the bill was first introduced in 2021, concerns emerged that wallet manufacturers and software devs might not be able to adhere to the tax reporting requirements, a part of the provision seeking to raise about $30 billion in tax revenues in the next 10 years.

The reintroduced bill has the support of the senate. During the first proposal, a similar bill seeking to narrow the definition of a crypto broker and to exempt validators and non-custodial product vendors was introduced by Senator Cynthia Lummis and Sen. Ron Wyden.