Christopher Morton is COO of Cognito.
The $1 trillion U.S. infrastructure bill, signed into law by President Joe Biden last week, contains provisions that would tax cryptocurrency trades and yield the U.S. government some $2.8 billion a year.
That is, frankly, not a lot of money.
The issue is that the crypto tax element of the law is not clearly written, and the government risks squashing a burgeoning part of the economy.
The infrastructure bill says “a brokerage” needs to keep track of these things. But you can enter into a smart contract without a brokerage, so who is responsible for reporting in that case? Would a miner be considered a brokerage?
There’s no question that, on some level, the government is due taxes earned from cryptocurrency trading like any other investment gain — typically at the time a person liquidates, or like a transfer of property. But the vagueness of the law risks either trading platforms eliminating access for U.S. citizens or simply preventing smaller cryptocurrency investors from joining or remaining in the market.
We’ve seen this before. FATCA, the Foreign Account Tax Compliance Act, c …