Crypto Regulation Needs Clarity, But Rushing It Is A Bad Idea
Rushing through crypto regulation will cause more harm than good, but having more substantive conversations is a good start.
Current proposed language in the infrastructure bill working its way through Congress will lead to unforeseen consequences that will damage the crypto space at a fundamental level. That said, the fact that legislation is being discussed at these levels is a (small) step in the right direction.
Seemingly a contradictory statement and idea, the codification and inclusion of this section of the infrastructure bill actually addresses one of the fundamental fears that some market participants have had; that the government would eventually regulate crypto out of existence. Crypto bans, or the equivalent of a ban on cryptocurrency transactions, are discussed often but that misses the broader point. No matter what sector is being analyzed, an underlying truth of business is that business dreads uncertainty, and that is exactly what the blockchain and crypto sectors have been operating with since inception.
Despite this uncertainty, however, the ecosystem has continuously developed and grown in an array of new directions, but resolving some of the tax and reporting ambiguity around crypto would go a long way to increasing business confidence. That said, simply increasing taxes and the compliance burden on the crypto sector is not a cure-all to the regulatory questions that still surround the area. Additionally, there are several other factors that are a direct result of this process seemingly being rushed to completion in the infrastructure bill.
Let’s take a look at some of the implications of this language.
Refine, with care. Some of the conversation around this proposed clause has to do with the reporting obligations for taxpayers and exchanges as they are connected to crypto transactions. The conversations around this allegedly increased reporting requirements misses the fact that crypto transactions are already robustly reported. The Internal Revenue Services (IRS) has been actively pursuing and collecting tax revenues linked to crypto transactions, and has also increased the personnel and technology assets allocated toward cracking down on crypto tax evasion.