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8-word crypto amendment in Infrastructure Bill an ‘affront to the rule of law’

A proposed bill waiting for vote in Congress contains a “dangerous” amendment.

Legal experts have warned that a section of the Infrastructure Bill, which is due for a vote today, amends a part of the tax code and makes a failure by businesses and individuals to report digital asset transactions a criminal offense.

University of Virginia School of Law lecturer Abraham Sutherland said it is a separate provision to the controversial “broker” provision that attracted all the attention when the bill was in the Senate:

“It’s bad for all users of digital assets, but it’s especially bad for decentralized finance. The statute would not ban DeFi outright. Instead, it imposes reporting requirements that, given the way DeFi works, would make it impossible to comply.”

Meltem Demirors, CSO at CoinShares, raised her concerns on Twitter about what she sees as the unconstitutional and anti-American nature of the amendment.

The amendment to section 6050I is a part of the infrastructure bill, which is scheduled to come to a vote in the House of Representatives today, Nov. 5th.

Since 1984, section 6050I of the tax code has required businesses and individuals that receive either physical cash or a bank transfer in excess of $10,000 to file Form 8300 and report the sender’s personal information, such as name, address, and Social Security number to the IRS. The eight word amendment in the new bill includes “any digital asset” in the definition of “cash.”

Related: US senator submits resolution to allow crypto payments in Capitol Complex

This raises obvious privacy concerns when applied to DeFi and cryptocurrency transactions and is unworkable for many projects.

Sutherland explained on the October 26th episode of Unchained with Laura Shin that Section 6050I quickly evolved to become a crime-fighting tool in the drug war throughout the 1980’s. He said, “This really is not so much about tax, it’s about crime fighting.”

If 6050I is applied to digital assets transactions, businesses and many individuals who fail to report the digital assets sender’s information to the IRS would be considered felonious criminals. Banks and other financial institutions are exempt, however. Sutherland wrote in a piece on DeCential explaining the ramifications in detail and concluded the amendment would be costly, unworkable, and dangerous.

“The amendment to section 6050I is an affront to the rule of law and to the norms of democratic lawmaking. It was slipped quietly into a 2,700 page spending bill, allegedly as a tax measure to defray the bill’s trillion-dollar price tag even though section 6050I is in fact a costly criminal enforcement provision. The proposal deserves attention now, while there is still time to stop it.”

With just a 221-213 majority in the House of Reps and a united Republican opposition, the Democrats need near unanimity on their own side to pass the legislation

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Slovenia Launches Public Consultations on Crypto Taxation Law

Slovenia Launches Public Consultations on Crypto Taxation LawAuthorities in Slovenia have prepared new legislation tailored to determine how crypto holdings and transactions are taxed in the country. The proposal, aimed at clarifying the matter, has been submitted for public consultations this week, local media reports revealed. Slovenia to Amend Tax Rules for Cryptocurrencies The Finance Ministry in Ljubljana has opened public consultations […]

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Crypto tax ‘a top enforcement priority,’ reminds IRS commissioner

IRS Commissioner says crypto gains are taxable in the cannabis industry as the IRS treats cryptocurrencies as property.

The Internal Revenue Service (IRS) continues to propose new tax reforms to regulate the crypto investments in the United States, with the latest notice sharing tax obligations for the marijuana industry.

The notice, signed by IRS Commissioner De Lon Harris, reflects the priorities of the United States federal agency to ensure cryptocurrency tax compliance among local businesses that grow, distribute and sell cannabis.

Commissioner Harris said that the use of cryptocurrencies in the cannabis industry is one of the top enforcement priorities of the IRS. The statement coincides with the recent proposal by the Senate lawmakers from July 2021 that intends to tighten taxation and reporting rules on businesses dealing in cryptocurrencies. According to Harris:

“Those who use it [cryptocurrencies] need to understand that the IRS considers it property, and there are gains that are taxable.”

In addition, the IRS Commissioner recommended cannabis businesses to work with reputable exchanges for converting cryptocurrencies into the U.S. dollar.

The IRS has not yet asked businesses to report high-worth crypto transactions explicitly. However, companies will need to file Form 8300 for every transaction that exceeds $10,000.

Related: US lawmakers propose adding digital assets to 'wash sale' rule and raising capital gains tax

The Senate’s bipartisan infrastructure deal recently that saw last-minute amendments proposed means to raise funds worth $28 billion by taxing crypto investments and transactions.

Following suit, more recently, on September 13, Democrats in the House of Representatives proposed new tax initiatives that would increase the tax rate on long-term capital gains. If approved, the law will increase crypto taxes for “certain high-income individuals” by 5%.

According to Cointelegraph’s report, the bill also recommends a surtax of 3.8% on net investment income, bringing up the tax rate to 28.8% for select investors.

Additionally, the new tax plan will impose the wash-sale rule on cryptocurrencies and other digital assets, which prevents investors from claiming capital gains deductions. Currently, U.S. lawmakers suspect crypto investors of using wash sales to manipulate the capital gains of their portfolio.

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India’s Income Tax Department may soon target crypto trades and ecosystem

Indian entrepreneurs believe crypto tax laws are foundational to mainstream crypto acceptance by governments.

As the Income Tax Department of India reportedly considers taxing crypto traders and crypto exchanges soon, experts believe investors should rest assured.

According to ET Now’s report, the tax department, which operates under India’s Ministry of Finance, has signaled interest to tax crypto earnings through trade and exchanges. However, the sources claim that the move will not entitle cryptocurrencies to a valid asset class position.

Speaking to Cointelegraph, Indian entrepreneur Nischal Shetty, CEO of WazirX crypto exchange, said that getting clarity on crypto-related Goods and Services Tax (GST) will help in identifying the asset class of cryptocurrencies:

“It’s a no-brainer that your crypto earnings are taxable like other income and should be declared in the Income Tax Returns. As of now, it is not clear whether the GST would be applied on the amount of cryptocurrency bought or on the transaction fees paid by the user.”

Along these lines, the initial report suggests that the Indian government believes that all activities that generate incomes in cryptocurrencies must be taxed. However, a soon-to-be-released legislative proposal by the cabinet will provide further clarity on this decision.

On September 9, Reserve Bank of India Governor Shaktikanta Das echoed concerns about cryptocurrencies such as Bitcoin (BTC): “We have conveyed our serious and major concerns about cryptocurrencies to the government from the point of view of financial stability.”

Citing possibilities of a brewing legislative bill on crypto tax, Indian investor Evan Luthra of Luthra Group told Cointelegraph that taxing digital currencies “is a good thing.”

“I think investors and potential investors have nothing to be scared about. Governments that realize the true potential of cryptocurrencies and bring in policies to support the innovation will be the leaders of the future.”

Related: Former reserve bank official pushes for India to accept crypto

The Reserve Bank of India (RBI) shared a booklet on January 25, exploring the use cases of a digital version of fiat currency.

While the government sees only two viable options for crypto, adoption and complete ban, the RBI has plans to implement its own version of CBDC if “there is a need.”

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Mining Is Not Banned in Ukraine and Does Not Require Licensing, Key Crypto Advisor Says

Mining Is Not Banned in Ukraine and Does Not Require Licensing, Key Crypto Advisor SaysThe regulatory status of cryptocurrency mining remains somewhat undetermined in Ukraine, even after the recent adoption of the law “On Virtual Assets.” However, albeit unregulated, the minting of digital coins isn’t prohibited either, according to a leading advisor on crypto matters at the Ukrainian parliament. Amendments to Ukraine’s Tax Law to Regulate Accounting for Crypto […]

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Crypto Mining Should Be Registered and Taxed in Russia, Financial Market Committee Chair Says

Crypto Mining Should Be Registered and Taxed in Russia, Financial Market Committee Chair SaysCryptocurrency mining should be registered as entrepreneurial activity and taxed as such, according to Anatoly Aksakov, chairman of Russia’s parliamentary Financial Market Committee. The lawmaker also thinks Russian digital currency regulations need refinement. Amendments Likely to Affect Mining, Taxation, Definition of Digital Currency Discussing upcoming changes in the legislation regarding digital currencies in Russia, head […]

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Slovenian finance authority proposes 10% tax on crypto income

Slovenian financial authorities have announced a proposal to tax cryptocurrency participants 10% on their asset income, specifically on purchasing and selling activities.

According to local media reports, the Financial Administration of the Republic of Slovenia, or FURS, is considering imposing a 10% taxable income bill on cryptocurrency asset activity in the near future.

Under the current legislation method, the authority analyses an individual's digital asset activity on a case-by-case basis by trawling through their buy and sell transactions. This can result in a stagnant and tedious crypto administrative process.

The introduction of this progressive initiative aims to digitally streamline the process, focusing solely on the purchase of goods and services, or the conversion of crypto assets into fiat currencies. Within these parameters, individuals will be taxed at a rate of 10% on their income.

In the STA news report, FURS shared additional information on the proposal:

“We would like to emphasize that it is not profit which would be taxed but rather the amount a Slovenian tax resident receives on their bank account on turning the virtual currency into cash or when buying a thing.”

French government pushes for one agency to regulate crypto across the EU

Slovenia has been a consistent voice in spearheading the adoption of digital assets and blockchain technology across Europe in the last few years.

An aggregated cryptocurrency index created by the financial research firm Crypto Head ranked Slovenia 7th in their capacity to fully adopt cryptocurrency assets calculated using a variety of metrics including Google searches, crypto ATM saturation and legislation.

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Iranian Tax Authority Urges Regulators to Legalize Cryptocurrency Exchanges

Iranian Tax Authority Urges Regulators to Legalize Cryptocurrency ExchangesThe Iranian National Tax Administration (INTA) has put forward a proposal to tax digital asset exchanges operating in the country. The authority calls for the legalization of their activities, fearing restrictions could negatively affect tax collection. Tax Agency Wants to Obtain User Data From Authorized Exchanges Seeing an opportunity to use exchange transactions as a […]

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EY aims to simplify cross-border withholding tax process with blockchain

EY expects that its new blockchain-based withholding tax solution can lay a foundation for the European Commission’s withholding tax relief system.

Global professional services firm Ernst & Young (EY) continues exploring the potential of blockchain technology to improve taxation processes with a new initiative.

The company announced Wednesday that EY completed a blockchain-based project to address complexities and inefficiencies in the cross-border withholding tax (WHT) process, generally a paper-based process where data could be lost or not shared properly due to privacy concerns.

“It also may not be trusted by counterparties and tax authorities, who require more and more information to validate that the correct amount of withholding tax has been paid either by relief at source or after a withholding reclaim,” EY noted.

The new WHT solution implements EY’s blockchain-based technology to enable secure, automated and decentralized sharing of financial information between tax authorities and related intermediaries and improve tax compliance and reduce fraud.

The project involved several global tax authorities, including the United Kingdom’s tax collection agency HM Revenue & Customs, the Netherlands Tax Administration and ​​relevant authorities in Norway. Participating companies included French banking group BNP Paribas, American investment bank JPMorgan, financial services company Northern Trust, and Citibank.

As part of the project, EY experts alongside state and industry representatives have specifically tested the TaxGrid blockchain solution, a multi-party blockchain network connecting financial intermediaries to share tax and finance data. The solution deploys smart contracts to tokenize investment entitlements and distributes them on blockchain wallets owned by various financial entities. The tool uses tokens to receive investment data and calculate the appropriate WHT once final investors are identified.

To ensure privacy on the TaxGrid network, the solution implements zero-knowledge proof technology, a digital protocol that allows sharing data between parties without using passwords or other private information.

Related: Binance cuts withdrawal limits, rolls out tax reporting tool

“Distributed ledger technology as a solution to the WHT challenge is no longer merely a concept,” EY’s WHT distributed ledger report notes, adding that the project has provided a basis for enabling a global solution to address various demands of taxpayers and tax authorities. “This could support the European Commission’s proposal to begin building a common, standardized, EU-wide system for withholding tax relief at source,” starting in 2022, EY stated.

EY has been actively working on blockchain and cryptocurrency-related tax solutions in recent years. The company last year released a crypto tax app called EY CryptoPrep to provide a fully automated product to assist clients with tax filings in the United States.

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Senators add crypto taxes to infrastructure deal to raise $28B in extra revenue

U.S. lawmakers believe they can find $28 billion worth of infrastructure funding by expanding taxation on crypto transactions.

Last-minute additions to the bipartisan infrastructure deal in the United States Senate saw lawmakers propose expanded cryptocurrency taxation to raise an additional $28 billion in revenue.

The proposal will implement tighter rules on businesses handling crypto, expand reporting requirements for brokers and mandate that digital asset transactions worth more than $10,000 are reported to the Internal Revenue Service.

Senator Rob Portman of Ohio, the lead Republican for the infrastructure discussions, noted Congress has expressed concerns regarding crypto reporting and taxation requirements for some time:

"Everybody's been talking about the appropriate way to provide more reporting in particular and that leads to better compliance." 

The crypto measures were hastily added to the deal on July 28, following weeks of back and forth between the Republicans and Democrats. Revenue from the new crypto taxes will be used to partially fund a $550 billion investment into transportation and electricity infrastructure.

The digital asset industry is already pushing back against the proposal, with Blockchain Association executive director, Kristin Smith, arguing that many of the firms that would be subjected to the new rules lack the capacity to collect the required information.

“We're pushing every lever right now to change it," she said, describing the proposed measures as “hugely problematic.”

The proposal comes as crypto assets are coming under increasing regulatory scrutiny in the United States.

On July 27, Acting Comptroller of the Currency, Michael Hsu, revealed that regulators are investigating the commercial paper reserves backing leading stablecoin, Tether (USDT).

Tether has faced criticism for its opaque reserves and failure to deliver promised audits for roughly half a decade. In May the firm disclosed a breakdown of its reserves that states USDT is 49.6% backed by “commercial paper.”

Related: Tether promises an audit in ‘months’ as Paxos claims USDT is not a real stablecoin

During a hearing on cryptocurrency before the U.S. Senate Committee on Banking, Housing and Urban Affairs held on the same day, law professor Angela Walch also called for greater oversight of the mining sector.

Walch highlighted the ability for miners to order blockchain transactions and siphon Miner Extractable Value (MEV) as significant issues failing to make it onto the radar of lawmakers.

On July 19, U.S. Treasury Secretary Janet Yellen pushed for greater regulation governing stablecoins and stable token issuers during a meeting of the President’s Working Group on Financial Markets. The group expects to have issued draft stablecoin regulations in the coming months.

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