Cryptocurrencies D.C.'s Latest Roadkill

It’s been good news-bad news for the taxpayer while Republicans and the Democrats wrestle over President Biden’s infrastructure bill, or how they are going to “pay” for it. Floating bonds and having the Fed create money from nowhere to buy the bonds seems to be working great, but, occasionally politicians want the taxpayer to actually see and feel their taxes increasing, in this case for roads, bridges, and whatnot, 

The good news is Republicans pushed back on the idea of hiring more IRS agents to roam the countryside looking for what the Associated Press calls “tax scofflaws.” These scofflaws have created a $1 trillion gap in what is owed to the IRS and what is being collected according to IRS commissioner Charles Rettig. 

In the bi-partisan bill, Republicans hit the brakes on the idea of strengthening the IRS’s reach “which they have accused over the years of unfairly targeting conservatives.” Plus, the Democrats have a little taxman budget boost in their reconciliation bill.    

Now, Bloomberg reports Republicans and Democrats have identified a pocket they both agree on to pick to fund their spendapolloosa: cryptocurrency brokers. The Senate, at the last minute, figured it can raise $28 billion with a “large-scale increase in the requirements for crypto brokers and investors to report their transactions to the Internal Revenue Service. The reason for the last-minute inclusion: the proposal would raise a chunk of money to help fund the $550 billion of investment into transportation and utility upgrades.” 

Bloomberg says those in cryptoland were “caught off guard.” Trades over $10,000 involving cryptocurrencies must be reported. The White House and Republican Rob Portman struck the compromise to hone in on crypto pigeons.   

From ZeroHedge, "This is not a drill," writes Jake Chervinsky, an influential crypto lawyer and a sober voice in a hype-prone industry. In a must-read Twitter thread, Chervinsky explains how the $550 billion bill - which is primarily about roads and bridges - could shiv American crypto companies.

Jeff John Roberts writes in decrypt.co that “broker” as the infrastructure bill defines it is any company that touches crypto. As Chervinsky writes, "This definition is so broad, it could apply to nearly every economic actor in the US crypto industry, if read literally." The catch-all "broker" term could apply to miners, DeFi startups, and others who will have to file customer forms with the IRS, a task that is in some cases impossible.

The pols in D.C. are treating cryptocurrencies like online gambling, and no one knows how the $28 billion number was conjured up. But, what we do know is that Biden really, really wants an infrastructure bill passed to generate “high-paying, union jobs” building highways and bridges. Crypto will “become roadkill to make that happen, [and] few in Washington will bat an eye.”

Mr. Roberts explains, “One Washington insider—who describes the situation as a ‘live fire exercise’—tells Decrypt the industry has mobilized like never before and various factions are putting aside differences to fight a common threat. But she added that ‘we're running out of cards to play’ as Democrats pull out the stops to pass the infrastructure bill by August.”

“For years now, the industry's leaders have carried on like they're too rich or too cool to be bothered with Washington DC,” Roberts writes. 

To that point, traders have pushed Bitcoin’s price back above $41,000 and Etherium’s above $2,500.  Nothing to see here?