The cryptocurrency provision does several things to extend government oversight over cryptocurrencies. One of its first provisions is to extend certain bank reporting laws to crypto transactions that are over $10,000.
More importantly, the provision seeks to expand the definition of a "broker" in the Internal Revenue Code of 1986. Such an expansion will include anybody who is "responsible for and regularly providing any service effectuating transfer of digital assets" on behalf of another person.
This means that brokers that handle cryptocurrency assets have to comply with the Internal Revenue Service's (IRS) existing reporting requirements for brokers. (Related: New infrastructure bill contains Orwellian surveillance provision targeting cryptocurrency users, spelling DOOM for the crypto markets if passed.)
The cryptocurrency provision was inserted into the infrastructure bill as a way of explaining how the Democrats plan to cover the cost of its $1 trillion plan. They argue that the improvements in tax compliance will be able to cover around $28 billion of the plan.
Making cryptocurrency brokers follow the same standards as other brokers may seem like it would address some of the problems of cryptocurrencies. The cryptocurrency provision in the bill makes it clear that there is substantial harm in what the Democrats plan to do. (Related: Investigation: Many cryptocurrencies are nothing but a massive Ponzi scheme promoted by paid "influencers.")
This is a clear ratcheting up of financial surveillance that will require the government to keep an eye on all cryptocurrency users. The IRS will be able to get the names and addresses of people who own cryptocurrencies.
At the same time, the provisions will force the developers of cryptocurrency trading software to create cumbersome and invasive systems to spy on their users. The only alternative they have is to not offer cryptocurrency services in the United States.
The provision will also create more honeypots of private information about cryptocurrency users. This could attract malicious actors who looking to steal financial data from Americans.
These added layers of government surveillance and legal complexity will make any future innovations into cryptocurrency move overseas. The red tape future blockchain developers and the hoops people with cryptocurrency transactions have to go through will just be too much.
Before the bill was passed, some senators attempted to amend the cryptocurrency provision in the infrastructure bill. But all of these efforts were defeated.
There was even one amendment that was proposed after several days of negotiations between a bipartisan group of three Republicans – Sens. Pat Toomey of Pennsylvania, Cynthia Lummis of Wyoming and Rob Portman of Ohio – and two Democrats, Sens. Mark Warner of Virginia and Kyrsten Sinema of Arizona.
The amendment the five senators came up with would have addressed concerns from cryptocurrency industry lobbyists. Their main concern was that cryptocurrency miners and software developers would be forced to report tax data to the IRS that they did not have access to.
The Lummis-Warner Compromise, as it was called, was brought up in the Senate on Monday afternoon by Toomey.
Toomey called for the amendment to be voted upon by unanimous consent. This means all 100 Senators have to support it.
Sen. Richard Shelby of Alabama objected. He wanted the cryptocurrency provision to include his amendment for $50 billion in additional military construction money.
Socialist Sen. Bernie Sanders of Vermont objected to this, and Shelby refused to consent to the cryptocurrency compromise without the additional military funding.
"Because there's a difference of opinion on whether or not the senator from Alabama should get a vote on his amendment, because that is not agreed to, the body is refusing to take up an amendment that has broad bipartisan support," said Toomey on the Senate floor, criticizing his Republican colleague. "In what universe does this make any sense?"
Learn more about how the cryptocurrency provision in the infrastructure bill will speed up the collapse of the cryptocurrency market by reading the latest articles at BitcoinCollapse.news.