Crypto legal expert Jake Chervinsky is laying out exactly how crypto provisions in the new infrastructure bill could impact the cryptocurrency industry.
In an interview on the Bankless podcast, Chervinsky gives a refresher on the new US bill, explaining that its expansion of the term “broker” could negatively affect virtually everyone in the crypto industry.
In a decentralized, largely anonymous and private ecosystem, Chervinsky says things like filing a 1099 form – which the bill would require for most entities in the decentralized finance (DeFi) space – would be impossible.
“The infrastructure bill’s tax provision would expand the definition of these ‘brokers’ to have these reporting requirements to include basically every single actor in the crypto markets. The definition says ‘anyone who is in the business of regularly providing a service that effectuates transfers of digitals assets is a broker’…”
Chervinsky, DeFi chair of the Blockchain Association, goes on to name a handful of the different entities that could be “captured” by the new provision.
“In theory, miners might have to do form 1099s for any user for whom they include a transaction in a block. Potentially liquidity providers in decentralized exchange (DEX) protocols could be captured by this requirement and have to KYC (know your customer) all of the users of the DEX protocol. Or DeFi interface providers, which includes most of the major DeFi developers and also aggregators, in theory, could be captured by this.”
The lawyer says the popular non-fungible token (NFT) space could be impacted as well.
“Something we haven’t even started to discuss publicly I think, is how this impacts NFTs. You could imagine an NFT marketplace being captured by this. Even, in theory, content creators themselves could be turned into brokers under the tax code…
And of course… There is fundamentally no way for these persons to comply with the IRS reporting requirements that are usually imposed on centralized custodial intermediaries.”
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