This is more than a privacy disaster. It is so far so vaguely worded (maybe deliberately?) that the government can target everyone in the ecosystem with penalties:
While the language is still evolving, the proposal would seek to expand the definition of âbrokerâ under section 6045(c)(1) of the Internal Revenue Code of 1986 to include anyone who is âresponsible for and regularly providing any service effectuating transfers of digital assetsâ on behalf of another person. These newly defined brokers would be required to comply with IRS reporting requirements for brokers, including filing form 1099s with the IRS. That means they would have to collect user data, including usersâ names and addresses.
The broad, confusing language leaves open a door for almost any entity within the cryptocurrency ecosystem to be considered a âbrokerââincluding software developers and cryptocurrency startups that arenât custodying or controlling assets on behalf of their users. It could even potentially implicate miners, those who confirm and verify blockchain transactions. The mandate to collect names, addresses, and transactions of customers means almost every company even tangentially related to cryptocurrency may suddenly be forced to surveil their users.
> regularly providing any service effectuating transfers of digital assets
I fail to see how this is a "privacy disaster." It looks like crypto brokers are going to be treated like all other brokerages.
Do you also call it a "privacy disaster" when your bank account requires your name and address so they can report interest payments to the government? Or when Robinhood/Schwab/Vanguard/Etc send the IRS a list of all your stock transactions for the year in a form 1099?
Bitcoin is basically digital gold, and just like with gold, when you chose to buy or sell it the convenient way (eg. through an ETF instead of actual physical gold), it gets reported to everybody.
You can always custody your own bitcoin and find partners to transact with directly and choose not to report it (like with physical gold), but, similar to physical gold, it will be extremely cumbersome, risky, and not worth your time to do so.
The argument is that software developers or miners should not be treated as brokers, the later being akin to ISPs. If you are not going to engage with this argument, why bother?
Why argue against something that isn't actually in the legislation and is intended to scare people?
Sure, if you bend over backwards and squint through one eye, you can contort yourself into the bad faith interpretation that developers will be treated as brokers--given they can engage in "transfers."
But just because some entity can be considered to exist on the same "continuum" as crypto brokers, doesn't mean there isn't a clear division between them: https://rationalwiki.org/wiki/Continuum_fallacy
One could also contort themselves into the assertion that convenience stores engage in transfers with "digital assets" (shifting credit via digitally created loans provided by Visa).
Maybe I should publish an article saying this legislation will require 7-Eleven to report to the government every time you buy a twinkie? That'll really get some clicks!
> Do you also call it a "privacy disaster" when your bank account requires your name and address so they can report interest payments to the government? Or when Robinhood/Schwab/Vanguard/Etc send the IRS a list of all your stock transactions for the year in a form 1099?
"Disaster" is a loaded word, but of course it would be a huge privacy improvement if they didn't!
> Do you also call it a "privacy disaster" when your bank account requires your name and address so they can report interest payments to the government? Or when Robinhood/Schwab/Vanguard/Etc send the IRS a list of all your stock transactions for the year in a form 1099?
This isn't like that at all. This would be like the government requiring Microsoft to KYC every single user of Excel, because people use their software to manage money.
Not really, since excel can be used for everything from budgeting to making a list of your favorite movies. Cryptocurrency is for transactions and speculation, not much different than any other financial product when you shuck off the technical mumbo jumbo surrounding it. Why would that not be regulated?
No it's not. Not at all.
Is it accurate to treat crypto facilities as equity brokers, or more like foreign currency exchanges? (Forex probably have their own reporting requirements, the question is about analogous service, not the reporting/privacy part.)
You probably don't want crypto transactions to be taxed like forex ones--unless you enjoy paying capital gains taxes before you've even sold: https://www.investopedia.com/terms/s/section-1256-contract.a...
This should be read along with https://news.ycombinator.com/item?id=28042185 "Wealthy Americans Targeted by U.S. in Panama Tax-Fraud Probe". The fundamental question is "should paying tax be optional for rich people?" Large parts of the crypto ecosystem believe that the answer should be "yes". The US government believes the answer should be "no".
Believe it or not it's possible to support tax enforcement, and still not want the core functions necessary for cryptocurrency to be made illegal.
Is privacy, or specifically the ability to earn income while concealing it, a core function?
(It's an unfortunate feature of the weightlessness of modern money, crypto or otherwise, that proportionate privacy is now hard. In the old days, if you wanted to move a lot of money, especially internationally, you had to go to a lot of physical trouble: https://www.rte.ie/news/newslens/2019/1204/1096878-poland/ ; this was hard to hide and easy to intercept. Nowadays you could theoretically move billions with a brainwallet. The binance cold wallet is twice as much as the Polish wartime gold: https://bitinfocharts.com/top-100-richest-bitcoin-addresses....
So we end up with a situation in which in order to track the large transactions a system is built which tracks all transactions.)
Paying tax is and will always be optional for the rich. Crypto offers the middle class a chance to evade taxes as well, so lawmakers are of course far more adversarial to it than they are to the methods used by themselves and their corporate friends.
One cold hard look at https://usdebtclock.org/ is enough to convince me that paying taxes to the US government is not a moral imperative. Every penny I pay is going towards paying off a massive ever-expanding black hole of debt that is mathematically impossible to ever pay off, the government is going to spend the same amount regardless of the revenue it collects since the Fed just prints it all anyways. So what's the point in "paying your fair share" in such a system? You'd be a fool not to evade as much as you possibly can.
This misses the point: 'loopholes' often require sacrificing optionality. Most "X billionaire paid Y in taxes" have to do with _deferred_ taxes or charity, which can't exactly be spent on lamborghinis.
There are definitely bad tactics and real loopholes, but this isn't the main problem. The real problems are more subtle and they require trade-offs.
These problems won't be solved as long as the tax code remains as complex as it is.
Massive tax regulation is a surprisingly recent invention.[1]
[1] https://www.politifact.com/factchecks/2017/oct/17/roy-blunt/...
EDIT: the parent author's very strongly worded statement isn't true. I'm trying to add clarity to a vague statement, not wage an ideological battle.
"Crypto offers the middle class a chance to evade taxes as well" - how?
This legislation will not raise more tax revenue like it proposes. It will stifle the US crypto industry and push it into friendlier jurisdictions. Ultimately it could end up reducing tax revenue compared to not touching the crypto industry.
> It will stifle the US crypto industry and push it into friendlier jurisdictions.
And nothing of value will be lost
Only if the government continues to insist on taxing income as a main source of income. The government could easily implement a sales tax and crypto would only be a small obstacle to enforcement. And as a bonus feature we could fire a bunch of bureaucrats too.
Sales taxes are regressive and affect the poorest the most. Income taxes (can be) progressive.
Progressive taxation benefits society at large.
I don't think this would be a good idea for fairness reasons, but assuming you'd implement it this way: How would you collect sales tax if you allow completely anonymous transactions? This is already a problem with cash, it would become a bigger problem if you introduce more convenient alternatives to cash in the form of crypto.
Founder of cryptotaxcalculator.io here. First of all I agree the proposed rules arenât particularly well thought out. The thing is, the 1099 forms that the IRS gets from existing brokers donât make any sense because as soon as you move funds between exchanges the broker can no longer accurately track the cost basis. Pre-crypto you generally wouldnât have this problem. From a tax compliance perspective it is an absolute nightmare, and I am sure this is just an ill thought out attempt at trying to make their lives easier. Probably not the best way to go about it though. There is a lot to solve in this space.
One of the underlying problems is that the capital gains tax code itself is designed for a world from a pre-financialized, pre-electronic world from the 1950s. The idea that someone might trade in and out of positions within milliseconds, possibly using complex derivatives or sophisticated leveraged is completely absent from the code. There's nothing in the code that addresses even how to treat trades that are done in the same day. Wash sale rules are literally non-determinable for high frequency traders. There's no guidance whatsoever on when and how derivatives are rolled against the a position in the underlying.
I run a HFT operation, and just computing my US tax returns required thousands of lines of code of custom software. And then to actually file it, I print off a PDF, thousands of pages long of each and every individual trade. Not a CSV, not a data file, literally a printout. As if some IRS accountant is going to manually go through millions of rows line by line with an adding machine.
Ha, I always wondered what HFT tax returns looked like.
Of course, the IRS cannot and will not check every transaction. But I do wonder if they actually verify some subset of the reported transactions, or would this only happen in an audit?
This is also true of stocks transferred between brokerages -- it's supposed to be transfered with. If it's not, there's a correction line on the 1099 with a space for accurate cost basis info, and you'd provide the original purchase receipt as an attachment. There might be issues in the space, but cost basis on a transferred equity isn't one of them.
Yes, this is correct. The technical term for this is an "in-kind" transfer, and while it might occasionally allow for things to slip through the cracks, it certainly hasn't stopped capital gain reporting requirements from being both feasible and largely effective.
>It is so far so vaguely worded (maybe deliberately?) that the government can target everyone in the ecosystem with penalties:
That's the point. They reserve the power of arbitrary enforcement early on because they don't know what the stuff they won't like will look like. So then they'll go after anything they don't like and leave it up to the courts and the legislature to clean up the mess.
The downsides listed are just cryptocurrency lobbyist talking points.
âRequire new surveillance of everyday users of cryptocurrency;â
What everyday users? Thereâs nothing you can do with this stuff except speculate, gamble and build obfuscated Ponzis.
âForce software creators and others who do not custody cryptocurrency for their users to implement cumbersome surveillance systems or stop offering services in the United States;â
Not offering these services seems like a positive outcome.
âCreate more honeypots of private information about cryptocurrency users that could attract malicious actors;â
Losing your money to malicious actors is a standard part of the crypto experience already. Endless scams and ransomware donât seem to worry the author.
âCreate more legal complexity to developing blockchain projects or verifying transactions in the United Statesâlikely leading to more innovation moving overseas.â
Ah, blockchain innovation, which is somehow so vital to the shining future of mankind, yet has utterly failed to produce anything of technological or economic value with the billions already invested. Overseas sounds like a fine place to continue this pseudoinnovation charade.
A vague, extraordinarily broad, and difficult to interpret statement is absolutely a disaster.
You might not like cryptocurrency, but this is akin to the infrastructure bill having a provision classifying anyone "responsible for and regularly providing any service effectuating encryption of information" as a munitions-dealer -- with wide downstream implications on (1) open source software, and libraries like OpenSSL, etc, and (2) vague enough to cover pretty much every webmaster who uses TLS certificates.
Disaster for whom? If the side effect of this ambiguity is a mass exodus from crypto who loses out apart from speculators and the black market?
I'd feel a lot more sympathetic if crypto uses cases didnt predominantly fall into those two camps (as is the case for cryptography).
Ambiguous laws are intrinsically harmful, so it is all citizen who lose out, who will be living under a legal regime that keeps on gradually degrading as people forget the principles it was built on.
Developing Open Source software is not âservicesâ, unless you have a customer paying for it.
Plenty of open source projects receive funding for their work. Just running ads on your site to defray hosting expenses can be enough to get you classified as a commercial service these days.
In case readers don't remember:
https://www.google.com/search?q=encryption+munitions+1990s
And of course the t-shirt:
To be fair, proof of work crypto does impact electric infrastructure, although itâs difficult to pin that on the negative or positive side of neutral because the cheapest electric rates possible include provisions for demand response / shut offs. The biggest operations will generally be trying to negotiate the cheapest rate possible, but thatâs not a given. Proof of work very much affects the generation side (generation costs for all customers, greenhouse gas emissions, etc) in the net negative though. The only exception to this would be on off-grid installations or installations on >100% renewable networks with complete demand response for the crypto and no other alternatives for exporting that power elsewhere. Even then itâs creating useless waste heat, but meh. For what itâs worth, Iâve owned Bitcoin and others in the past but now that Iâve had to deal with the impacts directly in my industry Iâm definitely over my infatuation.
> What everyday users? Thereâs nothing you can do with this stuff except speculate, gamble and build obfuscated Ponzis.
...
...
Anyone who has access to the internet can use the above (and it's just few examples, more on https://ethereum.org/) without any arbitrary restrictions set by any governments.
How can you look at these things and not be in awe?
And how on earth can somebody be so confident about something yet know so little about it?
The websites you all listed are just vehicles for further speculation and gambling.
Gaining interest on cryptocurrencies by providing liquidity so other people can speculate on cryptocurrencies, prediction markets (literally gambling on cryptocurrencies), NFTs (speculating on infungible cryptocurrency tokens), and some virtual game where you can further speculate on NFTs with a touch of gamification.
Nothing seems to tie into any real world usefulness, everything ties back into itself where the core is always 'will the value of my internet coins go up'.
The only single useful thing cryptocurrencies can do is you can buy drugs from the darkweb, semi-anonymously, or maybe completely if you use something like Monero.
You could borrow a stablecoin like USDC with collateral on a platform like AAVE, trade the USDC for dollars or another currency that is accepted, and use it to buy a house, car, etc, without anyone's approval or a bank being involved.
Because the original commenter is not arguing in good faith. There are countless examples of crypto and bitcoin helping civilians escape tyrannical states, conveniently non were mentioned.
I read this all the time but have never seen proof of this. Can somebody please name a few if they are so countless?
Countless examples, yet you failed to name a single specific example.
Well let's see if they help now.
Most of these things are either likely to be fads (NFTs) or just ways to fuel the speculation and ponzi schemes (compound and uniswap.) Theoretically lending could be used for doing things in the real world I guess, but it seems like once the money is in crypto, it just sloshes around creating more crypto. The betting market is an interesting one, I hadn't seen that. IMO DAOs and DeFi are interesting, but I haven't seen it have a big effect outside of crypto yet.
> Ah, blockchain innovation, which is somehow so vital to the shining future of mankind, yet has utterly failed to produce anything of technological or economic value with the billions already invested.
Cryptocurrencies have allowed me to feed my family back home in Lebanon, in a way that would simply not be possible with out it. I'm not sure if you don't think this happens on a daily basis, or is not of economic value.
>has utterly failed to produce anything of technological or economic value with the billions already invested. Overseas sounds like a fine place to continue this pseudoinnovation charade.
One quiet place where blockchain makes sense is shared ledgers between large financial institutions, JPMorgan for example is working a lot on this. It's not about privacy or usurping the social order or whatever imaginative solution to all of society's problems that gets attached to so many other things... it's just a better API between institutions for transferring ownership between themselves, which is a frequent and often awkward (and ancient) tech.
With blockchain you don't need a third party, with big institutions "theft" doesn't make sense. If there is an error and a transaction needs to be reversed it's in everybody's interest to do so and expected to happen from time to time and likely a built in feature.
Simplifying way back end transactions between banks is pretty nice... for banks, but pretty uninteresting to most people because it's just about settling daily balances between institutions and the like which is really boring.
> One quiet place where blockchain makes sense is shared ledgers between large financial institutions,
https://en.wikipedia.org/wiki/Payment_Services_Directive
Usually refusing to share information or API is a business choice. Besides, once you have a closed group, you just have signed transactions ("permissioned blockchain"), and can (must) ditch proof-of-waste. So it barely resembles what people normally think of as blockchain and starts to look more like signed git commits.
It's a worse API. In that situation, you have trusted parties. You don't need a blockchain, and the absolutely crippling tradeoffs it brings with it.
Sometimes the âAPIâ in these circumstances is CSV files sent by FTP nightly over private fiber links.
When all parties are trusted there arenât necessarily any crippling tradeoffs, you get mathematically provable ledgers with no need for a central trusted clearinghouse.
This use case wouldnât be affected in any way by the proposed legislation because banks already know their customers.
Anybody who has followed cryptocurrency in the last year knows that major US financial institutions and hedge funds have become heavily involved. The regulations coming are entirely to do with making the legal burdens of individual custody onerous enough that users place their coins on completely centralized exchanges to manage legal risk, all so these institutions have access to these coins for manipulation purposes like borrowing for shorting. The ONLY regulation you will see is on the average user so they can suck up coins like Daniel Plainview drinking your milkshake, NOT on market manipulation or trading habits of institutions which is the key driver of malicious activity and harm in the cryptocurrency space.
> for manipulation purposes like borrowing for shorting
I see this repeated a lot and I'm still not entirely clear why people feel this way. Most major markets in the world have futures/borrow mechanisms, and one of the key reasons is that it allows shorting.
Short selling is a critical element to any healthy market, and we've seen time and time again that markets without well functioning short selling are far more vulnerable than those with (i.e. real estate).
For instance, let's presume that crypto takes off, and business start accepting crypto for contractual obligations. If my future costs are in fiat, but future revenues are in crypto, I have a big mismatch with a very risky asset. A futures market (or shorting) allows me to hedge that risk out and protect myself against future volatility. I can lock in my fiat today, to ensure that I can cover my future costs. Without such a mechanism, I might not be able to risk a collapse in crypto markets.
Mature features (like borrows/futures) in crypto markets should aid in adoption.
I think the issue isnât that shorting and other functions exist, but that these arenât carried out by most retail investors. So frequently financial firms will benefit on this functionality using the base accounts of their customers.
So the introduction of this intermediation creates value possibility for large firms away from individuals.
Shorting is available to pretty much everyone now, especially with Robinhood et al and easy access to options markets (of course most people donât understand vol and probably shouldnât trade options). But itâs been easy to short even on the legacy brokers for as long as I can remember (a decade plus).
The issue with shorting is that you have theoretically unlimited downside which means greater risk and familiarity with concepts like margining. That is often outside the grasp of the average retail investor.
any US resident with a pulse and a SSN can open an account with Interactive Brokers and trade /BTC futures.
Just because they don't doesn't mean they can't.
>NOT on market manipulation or trading habits of institutions which is the key driver of malicious activity and harm in the cryptocurrency space.
How much evidence is there of major institutions acting maliciously in the cryptocurrency space, and the scale of the impact?
I'm sure there's likely quite a bit of market manipulation from some people or entities who hold a lot of cryptocurrency assets, but as much as I despise finance and financial institutions (of pretty much any kind), I also want to know who to hate even more, if applicable.
(Not asking in a rhetorical or contrarian or skeptical way; genuinely trying to understand who's accused of what and why. And excluding Tether, since we all know the accusations, there, and the comment seems to be directed at major US financial institutions that were huge long before Bitcoin was created, if I understand correctly.)
There's no need to invoke conspiracy theories about market manipulation. The Senate needed money for this bill, they saw that probably a lot of folks with crypto holdings are evading taxes, and they wrote this provision to make it easier to collect the taxes. It's poorly written, but the clear intent is for companies like Coinbase to have to file 1099s so the government knows who made how much every year, just like they do with conventional stock brokerages.
Crypto can be withdrawn from exchanges to a personal account that only that individual controls. This is unlike stocks, which sit in brokerages and could only be transferred to another brokerage (in kind transfer).
An example for someone in the US is that they buy crypto on Coinbase, and then they withdraw that crypto to a hardware wallet that they have control of. They leave their crypto on their hardware wallet for a few years and then transfer all or maybe only some portion of it to a different exchange, say, Kraken, and sell it there. How do the exchanges file a 1099 for that?
Maybe while the crypto was on the individual's hardware wallet, they also used some of it to purchase some goods or services. How is that tracked except on the individual's tax return?
I'm for regulation because I think it means the crypto space will mature and more people will feel it is safe to get involved. I also don't think people should use crypto for avoiding taxes (I do think that is overblown in the media considering that most blockchains are literally a public ledger, and all the government needs are some crypto experts and they can look at current as well as previous years of transactions, so folks shouldn't be doing anything shady).
I do also think that laws should adapt to new technological innovations. The only issue is that there isn't a critical mass yet that this technology is here to stay. The analogy is like fitting a square peg into a round hole. That's what the government is trying to do by over regulating crypto with regulations from the 20th century.
I actually would love if crypto exchanges could somehow give 1099s. That would extremely simplify the crypto tax reporting process, which right now can be very complicated, but I just don't see how it would work unless individuals only bought crypto on an exchange, left it on that exchange, and only sold whatever they bought on that exchange.
If someone withdrew their crypto, or deposited fresh crypto and sold it the exchanges would note it as part of the 1099, just like a brokerage would if you transferred stock. It would then be the taxpayer's responsibility to correctly report their buy and sell prices. You could cheat, of course, but you might get caught. Issuing 1099s at least simplifies the tax process and captures capital gains in a lot of cases.
I agree that the end effect will be largely what you suggest: aggregate activity in large institutions at the expense of smaller startups and decentralized protocols. But from talking to people in the space, it seems that most of the large exchanges and hedge funds are vigorously oppose to this law. Bryan Armstrong (the CEO of Coinbase) has repeatedly and publicly criticized the bill.
I'll cite Hanlon's Razor: Never attribute to malice what can be explained by incompetence. I think this is simply the result of what happens when we decide our government should be run by a bunch of octogenarian lawyers, most of whom's tech knowledge ends at their ability to reset their WiFi router. Is it really that surprising that Biden, Schumer, Portman, McConnell, Yellen, Pelosi, etc. have no understanding about how crypto works? They were all born before the charge card was even invented.
I agree that this provision is a disaster and will force a lot of cryptocurrency startups to incorporate outside of the US and also not offer their services to US customers. It's a real shame. The government should be able to get enough data for tax compliance just by making fiat on-ramps and off-ramps (aka exchanges) implement KYC (know your customer) rules.
> making fiat on-ramps and off-ramps (aka exchanges) implement KYC (know your customer) rules.
That's already the case for most exchanges, and they also log trades and provide these logs to both individuals and taxation entities for EoY tax reporting purposes. The "problem" is that once you've converted fiat into crypto, you can use decentralized exchanges, and trade back and forth ad infinitum with no traceability. This is a problem because every single trade (crypto to crypto) is considered a taxable event, and on a decentralized exchange or centralized exchange that doesn't do KYC, there are no tax-specific records and therefore such transactions are unlikely to be recorded.
Many people bemoan that it would be fairer and easier to just apply tax at the time crypto is converted into, and then out of, fiat. But a lot of profit can be earnt by the individual in between those on- and off-ramps, including the potential for profits to go, pardon the pun, into the ether, never to be seen again (by the government at least).
The crypto die-hards are also moving towards the lack of necessity to cash out to fiat, which would render the off-ramp taxation less effective. This may be why there's a specific focus on stable coins, as they eschew the need for converting back to fiat.
I am the founder of CryptoTaxCalculator.io and I am not sure where the idea of non traceability on DEXs comes from. Aggregating the transaction history is absolutely possible, all we need is the public wallet address. The real black box is around certain international exchanges that donât keep appropriate transaction records.
You're right, yes. I was attempting to point out that with a DEX there is no way to enforce record keeping or KYC, and so if someone is determined to avoid tax, then DEXs won't / can't report back to a tax authority.
Australian exchanges, as far as I've gathered, proactively send transaction details to the tax office, or are compelled to do so upon tax office request.
When it comes to public wallet addresses, it becomes up to the individual to voluntarily declare their ownership - such is my understanding.
I will defer to your knowledge and / or expertise if you disagree with my understanding, you need to know this stuff inside out - congrats on founding, and here's to a big future for crypto, you're well placed.
> will force a lot of cryptocurrency startups to incorporate outside of the US and also not offer their services to US customers
Sad for rug pullers, US are the primary market for FOMO altcoins.
The data is fully open already. They canât be this stupid.
This particular instance is a disaster, no doubt, but the real issue is the bundling of completely unrelated provisions into single bills. It's absurd.
This is a symptom of a symptom of a symptom.
Congress, essentially, only passes one bill a year now, the budget. That's the case because everything else requires 60 votes because of the filibuster rules. Filibuster rules were changed because Obama wanted the affordable care act. Standing in the way of that was the Tea Party, the group of Republicans that don't negotiate.
I'm going to both sides this one because we now have the counterpart to that on the left with the progressives.
There exists a segment of both parties that refuse to negotiate from their ideologies. This makes sure that neither party is capable of passing legislation unless they have a super majority not including that wing of the party.
The infrastructure bill is one of the very few things that can break this because the centrists of both parties do actually like it quite a bit, they just have to dog and pony hating each other before they get it done.
That and war. We can all agree on war.
> Filibuster rules were changed because Obama wanted the affordable care act.
This is not true. No filibuster rules were changed to accommodate the ACA. You might be confused because prt of the ACA was passed under reconciliation, a long-existing exception to the filibuster rules that allows spending and taxation laws to be passed without requiring a supermajority to invoke cloture. Reconciliation has been part of the Senate rules since 1974.
https://en.wikipedia.org/wiki/Reconciliation_(United_States_...
You're right. I was confusing that with the "nuclear option" for confirming SC judges that happened under Obama as well.
> There exists a segment of both parties that refuse to negotiate from their ideologies. This makes sure that neither party is capable of passing legislation unless they have a super majority not including that wing of the party.
And there is a root cause at the bottom of all this dysfunctionality: FPTP voting and gerrymandering that always converges into a two-party system with most districts being "solid red" or "solid blue", leaving only a handful of (highly contested) "swing states/districts" to squabble over.
Does it matter if there are X number of parties if you still end up with multitudes of DINOs and RINOs, etc? I will say that the right seems to be ideologically in lock step, with the lower tier members thoroughly whipped by their commanders in the party. In many ways I'm jealous of that efficiency, if only it were aligned to my economic interests.
In the democratic party on the other hand, there is a range of ideologies. It's not the left party, its the centrist to the left party. Joe Manchin is no progressive but he wears the D. This is especially apparent in California state and local politics, where the majority of politicians are democrats but you don't see progress in actual progressive initiatives, like housing or transport or homeless services and mental health treatment initiatives. Most of the democrats in California state and local offices really aren't that progressive, and pander to a base with socially progressive but economically conservative tenancies (the classic NIMBY). For example, it's widely popular to publicly speak out against racism, but if you attempt to do something about it like change the racist zoning ordinances that are still pervasive in your city, you will probably destroy your political career in the process and see yourself replaced by a DINO.
Not only is it absurd it seems to be a core part of how these bill get negotiated cross party
It's a provision intended to raise the funds for infrastructure investments, so it is arguably connected to the bulk of the bill.
Besides, mixing different topics is the only way anything can every be done: If you have a single issue you're fighting over with someone, zero-sum style, the best possible advice is to included something unrelated in the discussion, hoping that your interests differ in such a way that you can make trades beneficial to both parties.
Welcome to modern American government. We've failed to create a system that allows for small, frequent changes to the law, so now we have giant ones.
If this passes, which I think it will in some form, I believe the main impact will be a long-ish period of doublespeak between policy language and ability to enforce, eventually resolving in the end of the policy. This sounds so similar to the crypto (encryption) wars in the 90's: a general sense, but not actual understanding of how <cryptocurrencies/consumer encryption> actually works, but a desire to regulate it because the new tech fundamentally upends current approaches to the privacy and freedom of access to <spending/communications> in a digital forum.
Overall, I've been cautiously optimistic on how a regulatory situation like this would go, once it actually launched, after hearing politicians like Sen Warner/Wyden talk about tech the last few years. However, I suppose the industry should have seen this coming after the recent Sen Warren "shadowy coders" comment about bitcoin core, and similar pushes from the UST across two admins.
The crux:
> âresponsible for and regularly providing any service effectuating transfers of digital assetsâ
KYC for all these entities, which almost sounds like it could include home routers, is technically impossible. Similarly to banning exports of a math proof (the crypto wars). USBs also enable transfer of digital assets. So do printers, if you go full cold wallet. Will USBs, home routers, and printers that I buy on amazon require my KYC/AML?
I say that not to highlight how nonsensical this law is, but to highlight that this won't be enforceable. If they do try to enforce it, I bet it will be as an umbrella authorization to go after the miners, and.... we'll see what happens to crypto, as that's a dangerous threat to hashpower. If crypto survives a situation like that though in the short term, my sense is the regulation would drop away in the mid term, similar to the encryption regs in the 90s.
> Will USBs, home routers, and printers that I buy on amazon require my KYC/AML?
Of course not. Those are products not services.
Let's break down the statement in detail:
> digital assets
This is something I'd expect to be defined in the definitions section of the act. Even if it's not, the most reasonable interpretation is going to be something along the lines of any digital product whose ownership can be traded for material value gain, which would include cryptocurrencies, NFTs, and possibly MMO virtual currencies. There's definitely a lot of gray area in defining digital assets, but pretending that word documents and the like are digital assets is intentionally misreading the law.
> effectuating transfers
The plain definition of "effectuate" is "to bring about" or some other variation that specifically implies a causal link. To effectuate something requires that the agent itself is causing it to happen. Mere incidental participation wouldn't be sufficient. If I tell someone to take $1000 out of my ATM in cash and send it to somebody else in the mail, the person who is following my instructions is effectuating the transaction; the post office is not.
> providing any service
As mentioned above, we are specifically restricting this only to entities that are providing services, not products. So people whose roles are limited to providing products (such as software developers) are not affected by this rule.
> responsible for and regularly providing
And said services have to be provided on more than a one-off basis. So even the example I gave earlier of ordering someone to move money around wouldn't qualify; the person basically has to be willing to do this on an ongoing purpose, essentially as their business model, for this provision to kick in.
In other words, the people who are affected by this are going to be those who are offering banking-like services for digital assets (e.g., cryptocurrencies, NFTs, WoW gold). Pedestrian things like routers and USBs are completely unaffected. The assertion of a sibling comment that software developers are potentially at risk is equally asinine. The people who are affected are the cryptocurrency exchanges, probably services like cryptocurrency tumblers, possibly miners or companies that operate MMOs.
> So people whose roles are limited to providing products (such as software developers) are not affected by this rule.
If you can classify software development as providing a product and not a service then miners can certainly make the same argument regarding the data they produce. More easily, in fact, since they have no particular business relationship with the entities blindly submitting transactions to the network. Software developers are routinely involved in maintenance and support contracts, or producing new software to spec, which is more of a service than a product.
The exchanges will be covered, of course, but they're so buried in onerous KYC/AML requirements already that they may not notice any difference.
Things like ENS/HNS domains will be some of that grey area for assets IMO. Right now I think a normal domain is a bit of a grey area (asset vs expense), but at least thereâs no reporting requirement for them.
Will my (hypothetical) .eth domain be considered a digital asset?
It sounds like you have a much better handle on the lawâs terminology in application than the industry groups and legal /regulatory teams do, which is good.
This is my sense as well. Congress will pass overly broad language, then the actual regulators who actually have to put in place will be like "what the fuck? how do we even conform to this?". Regulators will most likely issue exemptions year-after-year and basically say "we're not going to enforce this year, but next year you guys really better have your stuff in line"
This is almost exactly how the individual health insurance mandate worked in the ACA. Ten years later, it's never been enforced a single time. It just gets waived, year after year.
> This is almost exactly how the individual health insurance mandate worked in the ACA. Ten years later, it's never been enforced a single time. It just gets waived, year after year.
That is incorrect; it was in place and the shared responsibility penalty applied on taxes if the mandate was not adhered to from when it became effective in 2014 through 2018, but not after that because it was repealed by the Tax Cut and Jobs Act. It was never âwaivedâ.
It can be a justification for addition of backdoors. If backdoors don't help, it's okay, they can be used for other purposes.
I usually side with the EFF, but here going at total war against cryptocurrencies seems right to me.
I don't see any scientific or technological application that could benefit humanity and would be developed from blockchain technology.
I tried very hard to figure out uses for the hash machines once the cryptocurrencies will disappear, but sadly I could think of none. All of this silicon, these PCBs, will just be junk.
> I don't see any scientific or technological application
That's a defensible position. But how does that justify the government going to "total war". There are plenty of things that have no scientific or technological application. Reality TV, social media, fashion, nightclubs, sports, bakeries, those stupid outfits people dress pets up in.
At what point did people stop saying "it's a free country"? So you don't like some thing and don't see much merit in it. At what point did people's knee-jerk response to that change from "not my cup of tea, but you do you, man" to "that thing is completely worthless, everyone who likes it must be an idiot, and therefore the government should abolish it"
Well, you're right, my comment actually lacks of the spelling out of the negative part of this technology!!
As the usefulness is very doubtful but the energy consumption is utterly real, that is a net negative for the environment.
The electronic garbage, too, a huge problem.
I actually agree with you! PoW (proof-of-work) coins produce a big negative externality. That being said Ethereum is migrating to a PoS (proof-of-stake) system by year end that virtually eliminates all the problems you enumerate.
Even if you believe in a policy response, wouldn't you agree that it'd be better specifically target proof-of-work blockchains rather than crypto in general? Ironically this bill may actually do the opposite. It places a much higher burden of DeFi and stablecoins, which are mostly Ethereum native. It will probably shift usage to large centralized exchanges, which generally favors PoW based Bitcoin.
It's precisely when people feel this way about things that large chunks of our civil liberties are forfeit.
Precedents: the war on drugs, crusades against porn, alcohol prohibition, the war on terror, mandatory minimum sentencing, etc.
It's a lynch mob mentality writ large and allows reckless legislators and police to gallop right over all kinds of civil boundaries that very much exist for a reason.
A much narrower set of solutions could address your concerns: a tax on proof of work mining, a ban on the sale of hardware whose sole purpose is cryptocurrency mining, or a ban on domestic exchanges converting money to/from cryptocurrencies that use high-resource proof of work mechanisms.
I see no reason to ban proof of stake or other consensus mechanism cryptocurrencies, and stepping up enforcement of existing KYC/AML regulations would help fight money laundering.
I also must point out that real estate, sham art auctions, sham investments and businesses, and numerous other mechanisms collectively account for the vast bulk of all money laundering. Cryptocurrency is a niche player. It's also a niche player in the street drug market where the vast majority of transactions use physical cash.
As far as bubbles and speculative manias go... it's legal for an adult to buy a lotto ticket (that is run by the state!) or go to a casino (permitted and regulated by the state). This is no worse. I might support raising taxes on short term speculative sorts of financial games, but those would also need to be applied to high frequency trading and speculative games run by hedge funds in conventional markets. Those are much larger than anything in crypto.
I say all this as a mostly cryptocurrency skeptic.
You canât compare bitcoin to porn, gambling, drugs and alcohol. Bitcoin is the only one that doesnât affect dopamine levels in the brain, and that virtually no one would seek out if it was suddenly illegal.
Well, a huge lot of people make usage of bitcoin like it is gambling (i.e. as a speculative asset).
Cannot make generalities of course, but still.
"I don't see any scientific or technological application that could benefit humanity and would be developed from blockchain technology."
Cool, but there are plenty of financial, economic, and political applications of blockchain that will benefit humanity. Just because you don't understand the use case doesn't mean it doesn't have one.
It's not that I don't understand the use case.
It's that the current use cases can be either replaced by preexisting less compute-intensive tech, or that the usage is just meaningless (gambling-like speculation, failed attempt at anonymity, tax avoidance, etc).
However my comment is as well a call to everybody to think about it!
I know I'm not very brilliant, so if anybody can do a favor to the world and find out something interesting, I'd be extremely happy :)
"It's that the current use cases can be either replaced by preexisting less compute-intensive tech, or that the usage is just meaningless (gambling-like speculation, failed attempt at anonymity, tax avoidance, etc)."
The fact that you've binned all the usage into the "meaningless" category means you don't understand the use case at all. It's an alternative to the current hegemonic global financial system centrally controlled by the USA. You might think it's useless but plenty of people disagree and are using it in a meaningful way.
You put on a facade of humility and objectivity but your bias against cryptocurrency is pretty blatant.
> I don't see any scientific or technological application that could benefit humanity and would be developed from blockchain technology.
Assuming you work in tech, you must be aware how similar attitudes existed (within tech, as well) about what the internet itself would provide.
How are you so certain that:
A) you understand all the possible directions a new, network-effect driven tech could take in its applications
B) none of them add value to humanity
C) there are no parallels in your statement to "well horses work fine, why do I need cars."
As I said, I hoped I could think of some use for these hash machines. Same for the blockchain tech itself, i.e. some usage that would not be completely replaceable by some less compute-intensive tech.
I honestly hope those usages exist. I really do. But now I don't think they do.
But, frankly, even for Internet itself everybody could see the benefit quite early.
Anyway, if you do find interesting uses that are not replaceable by simpler things, you would save a lot of garbage!! And thus would do a favor to the environment.
So yeah I hope I'm wrong.
A Classic quote from Paul Krugam indicates that quite a few smart folks, so not everybody, did not see the internetâs benefit quite early or even much later.
There is a newer more comprehensive one which is worse for privacy https://www.coindesk.com/new-crypto-bill-in-us-congress-is-t...
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