Bitcoin is still a bit of an enigma to lawmakers, and the Senate hearing did not help clarify that.
After all, no one knows for sure how much bitcoin will cost in ten years or what it’s worth today – but those who participated gave their best guess.
The distinction between the value assigned to bitcoin by its owners (in terms of spending power) to that same price tag determined on markets was brought up multiple times throughout the meeting; experts stated they had mixed opinions about which would influence adoption more: government regulation or pressure exerted through public opinion.
The “is crypto the future” is a question that has been asked by many people. The Congress treats Bitcoin like stacks of cash, and they are not sure if it will be used in the future.
Getty Images/ozan kose/Agence France-Presse
Congress just decided, without fanfare or discussion, that economically important digital asset transfers should be as infrequent, onerous, and criminally suspicious as trading in bricks of currency. For the first time, an eight-word addition to the US tax code included in the infrastructure funding measure, which became law on Nov. 15, recognizes digital assets as cash—a little move with major implications for American innovation.
Section 6050I of the tax law, enacted in 1984, imposes onerous reporting requirements on enterprises that receive more than $10,000 in actual money. This discourages the use of cash and promotes the use of banks, which have been entrusted with monitoring and reporting American transactions for tax enforcement and other criminal-prevention reasons since 1970.
But Section 6050I is opaque for a reason: currency was already outmoded in the contemporary economy for economically important, law-abiding usage in 1984. So no one seemed to mind when Congress added another more motivation for people to utilize banks instead of cash.
Bitcoin and other digital assets, on the other hand, aren’t going away anytime soon. The November amendment would stymie the development of this new technology and essentially prohibit the usage of digital assets for a variety of purposes. It will drive innovation out of the United States. At the same time, it will entrench current banking institutions and big tech while forcing Americans to report one another or risk criminal charges.
Inconsistencies with other federal laws are also created by the new legislation. Section 6050I interacts with Bank Secrecy Act requirements in subtle ways that the amendment overlooked. Before Congress acted on such a significant technology, they should have been known.
In addition, the clause is unconstitutional. Without a warrant, companies are required to collect, verify, and disclose their customers’ names, addresses, Social Security numbers, and other personal information under Section 6050I. This is a huge infringement of private rights that will be challenged in court under the Fourth Amendment.
Unfortunately, clever Treasury Department rules will not provide a speedy cure. The act restricts regulators’ discretion, and it also imposes monitoring and reporting obligations.
Some members of Congress see the significance of this, and measures were quickly presented to rescind the hastily enacted, never-debated amendment.
Reps. Patrick McHenry (R., N.C.) and Tim Ryan (D., Ohio) proposed one of them, which has a dozen bipartisan cosponsors and would, among other things, replace the 6050I amendment with a study and report to Congress.
That is the correct strategy. On American soil, Section 6050I was initially established for face-to-face exchanges of untraceable tangible goods. Digital assets, on the other hand, aren’t only digital dollars. Digital assets, unlike actual currency, are very traceable. And digital assets aren’t going away anytime soon.
After years of quiet, Congress made its first significant incursion into digital-asset law on the sly and without regard for the ramifications. The catastrophic repercussions of the new legislation aren’t clear to people who don’t comprehend 6050I or digital assets, but they are real. It is possible to correct the error. The Section 6050I amendment should be repealed and the process restarted.
Mr. Sutherland is an adjunct professor at the University of Virginia School of Law and a fellow at Coin Center.
Kim Strassel, Kyle Peterson, and Dan Henninger provide their picks for the best and worst of the week in the Journal Editorial Report. Getty Images/ZUMA Press/University Of Maryland School Of Medicine Mark Kelly’s composite
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‘Congress Treats Bitcoin Like Bricks of Cash,’ appeared in the print edition of the January 18, 2022, issue.
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