Swathes of the United States cryptocurrency industry will presumably be forced to move abroad or closed down in the aftermath of new poorly-worded regulation.
What Happened: According to CNBC, language in a lengthy bipartisan infrastructure bill proposal expanded the definition of a digital asset "broker" to any party "responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person."
This could be arguably applied to custodial crypto wallets, many software firms, and possibly even miners running the blockchain themselves.
Owen Lau — analyst at Oppenheimer — points out that this language could potentially lead to expanding the reporting requirements applied to brokers to many other firms, which in turn would vastly increase the operational costs of small crypto companies.
He noted that the wording "can mean anything" and pointed out the absurdity, adding, "if I transfer bitcoin for you, then it can mean I become a broker."
Why It Matters: The cryptocurrency industry will not silently watch as a law that could make a big portion of United States firms operating in the space uncompetitive.
CNBC points out that representatives of crypto firms are expected to lobby intensely against the vague language contained in the bill.
Blockchain Association Executive Director Kristin Smith noted that as of Monday, the language has still not been finalized, and it could be fixed before the bill is implemented or even through a separate law.
She warned that in its current form, the bill could "detract people from wanting to invest or participate in crypto networks in the United States."
Jake Chervinsky — a lawyer, specialized in crypto-related securities litigation currently working as the general counsel at the firm behind the decentralized finance (DeFi) protocol Compound COMP/USD, said that many existing businesses would be unable to comply with the reporting requirements.
Those firms could only "shut down or move offshore" since they would be forced to report to the Internal Revenue Service information that they "don't have and can't get."
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