Whilst not a direct concern for UK taxpayers, there have been some interesting developments in United States (US) tax legislation in recent days. Joe Biden's landmark $1 trillion infrastructure legislation has been passed but, name aside, it incorporates a whole host of provisions tightening the reporting requirements of various US entities in relation to cryptocurrencies.
As is often the case, a vaguely drafted term (in this case "broker") is causing considerable concern in the crypto industry due to the seemingly arbitrary way in which this could be interpreted narrowly or widely by the Internal Revenue Service (IRS). In my experience when an individual or corporate entity are potentially impacted by vague terms enshrined in law inevitably they adopt a cautious approach. In this case, such a cautious approach would be to presume that you are caught by the legislation (and thus report to the IRS as it dictates) unless you have professional advice to the contrary.
As the article highlights, you do wonder if this increased administrative burden could push these companies out of the US and that you may well see some countries adopting light-touch regulation on such matters in an effort to attract the industry. If nothing else it will likely prove a hot-bed of US litigation whilst this uncertainty is debated and ultimately decided in the Courts.
The Biden administration’s $1 trillion infrastructure bill contains a crypto reporting provision that appears to broaden the definition of a “broker” to potentially include crypto miners and developers, which would make compliance difficult, if not impossible. Another provision in the bill could make digital asset transactions – from purchasing cryptocurrencies to trading non-fungible tokens (NFT) – a felony if not reported correctly. Crypto proponents fear this could all be very problematic for the industry in the U.S., and could even push innovation offshore.