In recent weeks, the blockchain industry made headlines when it had intense discussions with lawmakers after a proposal for $ 28 billion in crypto tax reporting unexpectedly became part of the non-partisan infrastructure deal (BID). Ultimately, the BID language remained unchanged, leaving uncertainty for companies building on blockchain, especially those dedicated to its value beyond cryptocurrency trading. Although their attempt to change the language has been unsuccessful, many claim victory over the industry, which finds its voice in the negotiations. Now it has to use that voice to focus the conversation on the essentials – the fact that blockchain technology is an infrastructure, not just a source of income to finance it.
Related: Biden’s Infrastructure Act does not undermine crypto’s bridge to the future
Infrastructure in the form of roads, railways, broadband, and the power grid serves to lay the foundations and connectivity for the growth and success of American businesses. Look no further than e-commerce companies that deliver goods to Americans’ doorsteps in every corner of the country. Your success depends on our infrastructure, from electricity and internet to airports and highways. Your profits are taxed and, at least in part, used to support the underlying infrastructure.
In the blockchain context, cryptocurrency trading is just one of many uses for the technology – and, as highlighted by its inclusion in the BID, one that can generate significant taxable income. But the technology itself, like our road and rail systems, is an infrastructure that creates opportunities for greater efficiency and connectivity to solve pressing real-world problems. Blockchain is already creating better access to financial services, faster and cheaper cross-border payments, and greater interoperability in international banking systems – promoting economic opportunity and financial inclusion in the US and around the world.
Related: The arrival of stablecoins and the future of financial inclusion
Remittances to low- and middle-income countries reached $ 540 billion in 2020, according to the latest report from the Global Knowledge Partnership on Migration and Development. However, when transferring money across borders using the traditional payment infrastructure, individual senders incur excessive fees. In the fourth quarter of 2020, the average global shipping cost of $ 200 was 6.5%. Blockchain improves the remittance landscape by significantly reducing fees, transaction times and friction losses associated with a plethora of intermediaries. Blockchain-based payments can take seconds instead of days, and transaction fees can be negligible – just fractions of a cent.
Blockchain has attracted innovators with tremendous talent who use this technology to develop products and solutions at warp speeds, much like they did in the early days of the internet. The possibilities are limitless, but only if technologists are allowed to continue building, improving and innovating. They are the software and protocol developers, validators, and miners that make the technology work. The vague language of the BID could introduce these technologists into the definition of “broker” and the associated reporting requirements. By failing to differentiate between the builders of the blockchain – the infrastructure – and just one specific use of that technology – the brokering of trade – BID risks undermining progress in this emerging industry.
Related: Broker licensing for US blockchain developers puts jobs and diversity at risk
Blockchain infrastructure vendors faced with the ability to report requests for data they simply don’t have will be forced to operate in an increasingly uncertain regulatory environment that their efforts (and the practical use cases that make them allow) ) slowed down at best. and in the worst case drift into the sea. Without a blockchain infrastructure, the country would not only miss the tax revenue from trading cryptocurrencies, but also the benefits of many other solutions that are currently being built.
Understanding the implications of this language, the industry came together and reacted emphatically – not to stand in the way of legitimate taxation of cryptocurrency trading or reporting requirements, but to train lawmakers. Experts still need to speak up and explain blockchain, its use cases and the roles of the various participants. Only then will lawmakers be able to pass laws that balance the need for regulation with the need to encourage innovation in order to continue to prosper in the United States.
The industry is optimistic after hearing the well-informed senators advocating amendments that differentiate between technology makers and financial services providers. Given the ongoing dialogue between industry and the U.S. Congress, there is still hope that this legislation will reach a place that will encourage tax compliance by the relevant blockchain users while also enabling innovation in the broader space. The work is far from over with the handover of the BID to the US House of Representatives. The industry stands ready to continue helping lawmakers create informed laws and expects policymakers to encourage, not hinder, technological advances and infrastructures such as blockchain, which are the backbone of America’s success and economic growth.
The views, thoughts, and opinions expressed herein are those of the author alone and do not necessarily reflect the views and opinions of Cointelegraph.
Denelle Dixon is CEO and Executive Director of the Stellar Development Foundation – a nonprofit that supports the development and growth of Stellar, an open source blockchain network that connects the world’s financial infrastructure. Previously, she served as Mozilla’s Chief Operating Officer and also served as general counsel and legal advisor in private equity and technology.