The bipartisan legislation working its way through Congress contains a provision that would potentially impact a wide array of market participants in the US$2 trillion crypto market.

The bill would potentially require each transaction involving a digital asset such as bitcoin, ethereum or other tokens to be disclosed to the Internal Revenue Service, much like a bank or brokerage firm currently reports to the IRS transactions with respect to shares of public companies and other financial instruments.

With the goal of increased transparency, the IRS is projected to raised $28 billion over the next decade, according to the Joint Committee on Taxation.

Transfers of crypto assets from one exchange to another would be captured by the new reporting requirement. Any business that accepted crypto assets worth in excess of US$10,000 would also be included in the scope of the new reporting requirement.

Drafters of the legislation, including Sen. Rob Portman (R - Ohio), have insisted that the intent of the legislation is that any person or entity acting as a broker by facilitating trades for clients and receiving cash must comply with a standard information-reporting obligation.

Notably, an earlier version of the infrastructure contained substantial appropriations for tax enforcement that are not included in the current draft of the infrastructure bill.

Reflecting the complaints of many industry groups in the crypto space, several Senators, including Senator Pat Toomey of Pennsylvania, are warning that the bill language defining who is a broker is too broad as it could be read to cover not just cryptocurrency brokers, but bitcoin miners and software developers, parties who are unable to comply with the bill’s reporting obligations. Arguing that “the text is unworkable”, Senator Toomey says that he will offer an amendment to the bill to narrow the definition of the parties that are covered.

Although Senator Rob Portman of Ohio, the author of the crypto language, denies that the language applies to these groups, Finance Committee Chairman Ron Wyden of Oregon also wants to narrow the language to ensure it doesn’t require miners, wallets and other service providers to send the IRS information that these parties don’t currently collect.

We will continue to monitor the legislation and will provide ongoing updates.