Talks of Crypto Regulation are Gaining Momentum: Here’s What Investors Can Expect
The greatest appeal of cryptocurrencies was the lack of regulation and decentralization. Most critics assume that these features can destabilize the US financial system. However, the government isn’t too concerned about these principles. Rather, crypto regulation has been a recurrent focal point of discussion among government agencies and lawmakers. Earlier this week, lawmakers debated on crypto regulations. They proposed some terms for the Senate’s $1 trillion infrastructure bill.
The chair of the Security and Exchange Commission, Gary Gensler, spoke about the agency’s part in regulating crypto. When it comes to the subject of the US regulating digital currencies, certain themes are recurrent. It involves preventing tax evasion and other forms of cryptocurrency crime and regulating stablecoins. Last but not least, it covers the untapped potential of assets like crypto ETFs.
For crypto fans, the decentralized properties of digital assets are a major draw. While cryptocurrencies aren’t backed by government institutions, unlike the regular currency, regulatory guidance can help protect investors. The author of the book, Cryptocurrency Investing for Dummies, Kiana Danial, supports this move by the government as well. She explained that despite the appeal of decentralization and no regulation, government oversight could prove beneficial. Unfortunately, the crypto domain is no stranger to scams, and investors need all the protection they can get.
The proposals can end up having a significant effect on crypto investors in the future. The clauses surrounding crypto regulation are part of a provision of the bipartisan infrastructure bill. Worth $1 trillion, the bill is set to go through Congress this week. The bill’s provision will enhance the definition of the term ‘brokerage’ so it includes firms that facilitate digital transactions. That means crypto exchanges will now be in the loop.
But this change will also mean more responsibilities when it comes to tax reporting. This will help the IRS track down attempts of crypto tax evasion. Reporting by different crypto experts argues that the draft’s language is too broad. Consequently, harmless people can get caught in the crossfire.
On Tuesday, the chair of the SEC spoke about the need to improve regulation to reduce ransomware attacks. One example of such an attack is the one that halted operations at Colonial Pipeline in May. This attack was among the bigger cases of hackers trying to get crypto ransoms.
Under the new laws of the infrastructure bill, companies that execute crypto trades need to report tax information to the IRS. The information will pertain to those specific trades, and they will have to start doing so from the 2024 tax season. This is quite similar to how traditional investment brokers need to report their tax information about stocks.