The Electronic Frontier Foundation (EFF), an organization that advocates for the rights of digital consumers, has warned that plans for a cryptocurrency tax in the massive Democrat-pushed infrastructure bill risks stifling the emergent crypto market in the U.S. and exposing the personal data of those engaged in it.
The critical danger, according to the EFF, comes from the bill’s stringent new reporting requirements for parties engaged in cryptocurrency transactions.
The forthcoming Senate draft of Biden’s infrastructure bill—a 2,000+ page bill designed to update the United States’ roads, highways, and digital infrastructure—contains a poorly crafted provision that could create new surveillance requirements for many within the blockchain ecosystem. This could include developers and others who do not control digital assets on behalf of users.
While the language is still evolving, the proposal would seek to expand the definition of “broker” under section 6045(c)(1) of the Internal Revenue Code of 1986 to include anyone who is “responsible for and regularly providing any service effectuating transfers of digital assets” on behalf of another person. These newly defined brokers would be required to comply with IRS reporting requirements for brokers, including filing form 1099s with the IRS. That means they would have to collect user data, including users’ names and addresses.
The broad, confusing language leaves open a door for almost any entity within the cryptocurrency ecosystem to be considered a “broker”—including software developers and cryptocurrency startups that aren’t custodying or controlling assets on behalf of their users. It could even potentially implicate miners, those who confirm and verify blockchain transactions. The mandate to collect names, addresses, and transactions of customers means almost every company even tangentially related to cryptocurrency may suddenly be forced to surveil their users.
The provision in the bill, warns the EFF, could create new “honeypots” of private data.
Make no mistake: there is a clear and substantial harm in ratcheting up financial surveillance and forcing more actors within the blockchain ecosystem to gather data on users. Including this provision in the infrastructure bill will:
- Require new surveillance of everyday users of cryptocurrency;
- Force software creators and others who do not custody cryptocurrency for their users to implement cumbersome surveillance systems or stop offering services in the United States;
- Create more honeypots of private information about cryptocurrency users that could attract malicious actors; and
- Create more legal complexity to developing blockchain projects or verifying transactions in the United States—likely leading to more innovation moving overseas.
Crypto markets have rebounded in recent days ahead of a major planned update to Ethereum, the second-largest cryptocurrency by market cap, tomorrow. However, the price of BTC, ETH, and most other cryptocurrencies remain below the peaks they hit in April this year, when BTC briefly traded above $60,000, and ETH hit a high of over $3,900.
Allum Bokhari is the senior technology correspondent at Breitbart News. He is the author of #DELETED: Big Tech’s Battle to Erase the Trump Movement and Steal The Election.