Much has been said of the dangerously ambiguous revised definition of “broker” in the infrastructure bill and its potential to stifle cryptocurrency innovation in the U.S. There is, however, another big problem with the infrastructure bill: §6050I. That provision of the U.S. tax code currently obligates businesses to file reports (including names and Social Security numbers) about their counterparties whenever they receive more than $10,000 in cash. The infrastructure bill would require similar reporting when businesses receive more than $10,000 in cryptocurrencies. Today the Proof of Stake Alliance published an excellent report [PDF] by Abe Sutherland explaining why the provision is a big problem for innovation.
This provision requires recipients of digital assets (incl. NFTs) to verify the sender’s personal info and record their Social Security number, nature of transaction, etc. Then, the recipient must sign under penalty of perjury and send a report to the government within 15 days.
Typically we don’t object to equal treatment of cash and cryptocurrencies, but the §6050I reporting provision is a draconian surveillance rule that should have been ruled unconstitutional long ago. Extending it to cryptocurrency transactions would further erode the privacy of law-abiding Americans. As the report describes in detail, §6050I would also be anachronistic and therefore difficult or impossible to obey in the context of cryptocurrency transactions.