LeXpunK_Army Statement On The 6050I Amendment (The Crypto Tax Provision) In The Draft U.S. Infrastructure Bill (for use in letters to Senators and Representatives)
LeXpunK Army Statement On Proposed Crypto Tax Provision In U.S. Infrastructure Bill
For LeXpunK Army members and supporters to send to their Representatives and Senators
We write today to bring attention to yet another dangerous provision that has been slipped into the U.S. Infrastructure Bill (“Bill”). In addition to the ambiguous definition of “broker” in the Bill and its potential to bring cryptocurrency innovation in the U.S. to a halt, there is another big problem with the Bill: §6050I.
Section 6050I 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 Bill would require similar reporting when businesses receive more than $10,000 in cryptocurrencies.
In addition to being nearly impossible to comply with, let alone enforce, extending §6050I to cryptocurrency transactions would further erode the privacy of law-abiding Americans. As a recent report by the Proof of Stake Alliance describes in detail, this provision, which has thus far escaped public or congressional scrutiny, could make receiving digital assets of any kind (whether that be cryptocurrency, an NFT, or any other digital asset) a felony if not reported correctly.
The proposed amendment to Section 6050I states that, in a broad range of scenarios, “any person” who receives over $10,000 in digital assets must verify the sender’s personal information, including Social Security number, and sign and submit a report to the government within 15 days. Failure to comply results in mandatory fines and can be a felony (up to five years in prison). As noted in the Proof of Stake Alliance report, “miners, stakers, lenders, decentralized application and marketplace users, traders, businesses and individuals are all at risk of being subject to this reporting requirement, even though in most situations the person or entity in receipt is not in the position to report the required information.” The minimum fine for intentional or willful violations is $25,000 and, as noted above, the maximum penalty is 5 years imprisonment.
The insertion of the section 6050I amendment in a trillion-dollar spending bill is inappropriate; it is obvious that there has been no investigation of the law’s costs or consequences, let alone its enforceability or purported benefits. A statute creating felony crimes for users of digital assets should be thoroughly investigated and debated openly as opposed to surreptitiously inserted into a spending bill.
Like the other provisions related to cryptocurrency, the hastily drafted amendment to 6050I will crush the cryptocurrency industry within the U.S., stifle U.S. innovation, drive U.S. jobs overseas, and jeopardize Americans’ Fourth Amendment protections.
While funding infrastructure is important, we do not believe it was the intent of Congress to impose on individuals impossible-to-fulfill reporting requirements that won’t bring in the $28 billion it seeks but will unnecessarily crush a nascent and promising industry.
Rather than including in the Bill a provision with vast unintended consequences, we encourage Congress to remove this language from the Bill. We welcome dialogue to find language that works for all stakeholders, while keeping America at the forefront of crypto innovation.