US bill that makes the crypto market nervous becomes less drastic at the last minute

The now infamous infrastructure bill was partially defused by the crypto lobby in the nick of time. The bill finalized last weekend would subject investors and various crypto market entities to new taxes.

Why is this important?

The infrastructure bill is a voluminous document of 2,702 pages (see cover photo). If the law passes Congress, the federal government will receive money to build new highways and other traffic projects. However, there was another clause hidden in the proposal that would roughly regulate the crypto market. A new bill in Congress on Monday caused the price of Bitcoin and countless other altcoins to crash. Bitcoin’s price fell from $42,000 to $39,000 on Monday morning.

However, at first glance, there was nothing special about the proposed crypto policy. Current crypto holders should not worry about a new regulation. “This law does not require individuals with digital coins to declare their crypto income. There are no new obligations for those who have crypto coins,” writes business site Forbes. LTC Litecoin is well known in crypto.

But if you look a little further, you quickly notice the news that raised the hair of the entire crypto community. “New users will be penalized,” Forbes said. The law would give the US Federal Revenue Service (IRS) the means to penalize new users who fail to report cryptocurrency returns.

$28 billion for the federal government

That’s not the only problem the crypto market had with the legal text. Crypto companies, especially crypto exchanges, will be defined as brokers, requiring them to provide additional information about client earnings to the IRS. The entire project would net the US government a total of $28 billion within a decade.

“If passed, the proposed law will have a significant impact on both investors and stock markets. The crypto exchanges will be given the big task of cooperating with reporting information to the tax authorities. Investors will not have to ‘do’ anything, but will see all the information about their income passed on,” Forbes said.

What would happen to cryptocurrencies stored in private wallets or the so-called cold wallets, which are actually offline wallets, is not yet entirely clear. Those coins are actually the digital equivalent of money kept under the mattress and so are extremely difficult to track, even for crypto exchanges.

Cryptominers and blockchain developers out of range for the time being

Under intense pressure from the crypto lobby, some last-minute changes were made to the law. For example, the term “broker”, which is used to designate entities in the crypto market, has been clarified and not expanded further. FTX exchange is well known in crypto.

Any reference to “decentralized exchanges and peer-to-peer markets” was also removed. The term was replaced by a more nuanced definition: anyone who is “responsible for providing those services that arrange transfers of digital assets on behalf of an individual”.

The crypto community insisted that crypto miners and blockchain developers were kept out of harm’s way. This would be possible with the new definition. As a result, the software behind crypto coins would not be targeted by regulation for the time being.

Crypto lobbyists, meanwhile, insist that those parts of the industry should never be the target of regulation.

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