The U.S. House of Representatives has passed the $1 trillion infrastructure bill, which has divided policymakers and industry stakeholders across the country. What’s left now is for President Biden to sign it into law.
However, the reality of the situation is hitting crypto investors and entrepreneurs, who are rushing to figure out what a particular provision in the bill means for them.
A bill of questions
Coinbase CEO Brian Armstrong was one of the first to express his concern and tweeted,
“This 6050I provision in the infrastructure bill seems like a disaster if I understand it. Criminal felony statute that could freeze a lot of healthy crypto behavior (like Defi).”
“Our team is looking into this further to try and figure out what exactly the implications are[.]”
Meanwhile, the Crypto Council for Innovation published a letter to voice its displeasure. In fact, the CCI first pointed out that other parties – such as miners and developers – could be subject to regulations even if they were not strictly “brokers.”
Next, it slammed the “undue financial surveillance” that could come about due to the requirements. Finally, the CCI called for more clarity from Congress.
— Brian Armstrong (@brian_armstrong) November 6, 2021
Is there a need to panic?
The main source of FUD in the bill is 6050I, which is part of the U.S. Tax Code. A possible amendment to this section could put those receiving “digital assets,” in charge of collecting the sender’s personal information, storing the same, and reporting it to the government within a certain time frame.
If the bill becomes law, the rules could come into force from 2023. Independent lawyer Abraham Sutherland’s report on 6050I explained,
“The proposed amendment to Section 6050I states that, in a broad range of scenarios, “any person” who receives over $10,000 in digital assets must verify the sender’s personal information, including Social Security number, and sign and submit a report to the government within 15 days. Failure to comply results in mandatory fines and can be a felony (up to five years in prison).”
Needless to say, the KYC requirements violate the standard principles of DeFi. Even if crypto recipients wanted to comply, there might be no feasible way to verify or even gather the required information.
This means that people across the crypto industry – lenders, stakers, marketplace clients, companies, traders, investors, and more – could possibly face jail time for failing to comply.
What about highly volatile assets that can easily move above and below the $10,000 threshold? As we saw, even Coinbase needed to do some more research.
Privacy vs quietness
During an episode of the What Bitcoin Did podcast, host Peter McCormack called the requirements an “invasion of privacy.” The CCI’s letter also seemed to echo this sentiment.
So, what can be done? To be succinct, Sutherland’s report said,
“A statute creating felony crimes for users of digital assets should be debated openly, not quietly inserted into a spending bill.”