According to this article, they snuck in a provision called Internal Revenue Code Section 6050i into the Infrastructure bill that is on Biden’s desk.
Under the new rules, the transfer of digital assets above $10,000 in value will be treated like cash. And failure to report the identity of the person or business sending payment for the digital assets would be considered a felony offense. The penalty for noncompliance is up to five years in prison.
So if you buy an NFT of Dwayne Wade dunking, and you pay $15,000 for it, the IRS expects you to report:
social security number
of the person who sold it to you. Is that stupid or what!?!
Clearly the powers at be are using this as a way to deter the move to a more decentralized economy. Let’s see how the blockchain community comes together with their investment in lobbyists to fight this in the years to come.
Matt, thanks for bringing to our attention this provision of the new Infrastructure Bill that Congress just passed. This could be a massive game changer for crypto globally. You’re right to point out that the blockchain community will surely try to fight this. We’re in for an epic battle. We knew this was going to happen and it was just a matter of time before the US government started interfering more in the crypto economy. I don’t yet have an informed opinion on whether or not the new provision is good or bad, but would love to read the exchange between those that want to weigh in.
As I stated in my email. The reconciliation bill has not been approved in the house and senate so when the article says “under the new rules” they mean under the proposed rules.
That said, I believe there are some positives to the blockchain technology improving efficiency in banking and reducing cost but decentralizing banking all together removes the levers that the government has at it’s disposal to reduce inflation and provide stimulus. In addition, it also removes the governments ability to provide any control over financial corruption. You might say the government is bad at all 3 of these things now but should the US economy completely move to Crypto without any government control the US government will have no ability to maintain an orderly economy. You may not like how they regulate Crypto but if you believe that the US government should maintain some level of jurisdiction over the economy to provide orderly transactions and transfer of currency then you have to give them some type of power.
Regulation is good…. allows for institutional adoption and growth of the space.
Here is an update to my original post regarding the inclusion of Internal Revenue Code Section 6050i in the Infrastructure Bill.