A proposed bill waiting to be voted on in Congress today, November 5, contains a “dangerous” amendment, legal experts have warned, cited by CoinTelegraph. A section of the Infrastructure Bill would amend part of the tax code, making failure by natural and legal persons to report digital asset transactions a criminal offense.
According to Abraham Sutherland, University of Virginia School of Law lecturer, the “broker” clause attracted all the attention when the bill was in the Senate. He said:
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.
CoinShares CSO Meltem Demirors also tweeted concern about what she perceives as anti-American, unconstitutional nature of the amendment.
Unconstitutional proposition in the guise of crimefighting
For almost 40 years, the tax code’s section 6050I, subject to the amendment to be voted today, has required companies and individuals that receive either a bank transfer or cash in an amount over $10,000 to file Form 8300 and report the sender’s personal data to the IRS, including their name, address, and SSN. The amendment includes “any digital asset” as part of the definition of “cash,” raising obvious privacy concerns in the context of crypto transactions and DeFi. This renders it highly unfeasible.
According to Sutherland, this section 6050I quickly developed into a crime-fighting tool in the war on drugs during the 80s of the last century. He said that this wasn’t so much about tax as it was about crime fighting.
Companies and people who fail to report the sender’s information would be considered felons if 6050I were applied to digital assets transactions. However, financial institutions are exempt from this provision. Sutherland wrote:
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.
He added that now is the time to act, when there’s still time to stop the proposal. For the bill to pass into law, the Democrats must vote unanimously as they barely have a majority in the House of Representatives and the opposition is united.
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