Legal experts have warned that a section of the infrastructure bill, which is due for a vote on Friday, 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, chief strategy officer of CoinShares, raised her concerns on Twitter about what she sees as the unconstitutional and anti-American nature of the amendment.
this bill is unconstitutional and inherently anti-American— Meltem Demir◎rs (@Melt_Dem) November 4, 2021
private citizens have the right to financial privacy and financial freedom
absolutely shameful to see this https://t.co/O9FkVC2CF4
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 United States Internal Revenue Service. The eight-word amendment in the new bill includes “any digital asset” in the definition of “cash.”
This raises obvious privacy concerns when applied to decentralized finance and cryptocurrency transactions and is unworkable for many projects.
Sutherland explained on the Oct. 26 episode of Unchained with Laura Shin that Section 6050I quickly evolved to become a crime-fighting tool in the drug war throughout the 1980s. 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 Representatives and a united Republican opposition, the Democrats need near unanimity on their own side to pass the legislation.