IRS’s Crypto Data-Collection: A Call for Reform

The cryptocurrency community has been on edge for two years, awaiting the Internal Revenue Service’s (IRS) implementation of the Infrastructure Investment and Jobs Act. This legislation introduced new reporting requirements, potentially setting a de facto ban on cryptocurrency mining and exposing millions of Americans to felony charges. The IRS’s nearly 300-page proposal, while not as detrimental as it could have been, is still far from being considered sound policy.

As the October 30 response deadline approaches, citizens, companies, and consultants are finalizing their comments. It’s crucial to understand why businesses should not be mandated to report customer information to the government by default.

The Infrastructure Investment and Jobs Act of 2021 was initially focused on infrastructure development, not cryptocurrency or financial reporting. However, to offset spending, provisions for increased financial surveillance on cryptocurrency users were added, accusing them of tax evasion. The Joint Committee on Taxation estimated a $28 billion tax revenue over ten years, a figure later reduced to $2 billion by the Biden administration. Even this reduced estimate may be an overestimation, as acknowledged by Treasury officials.

With the cost-offsetting argument losing ground, what remains is an apparent increase in U.S. financial surveillance. The IRS’s proposal does exclude miners and some software developers for now, but it sets a concerning precedent for deciding reporting requirements. The focus is on whether a person is in a position to know customer information, rather than whether they ordinarily would. This implies that some decentralized exchanges and self-hosted wallets may be compelled to report customer information, even if they have no need to collect it.

This approach is in line with the U.S. government’s gradual expansion of financial reporting requirements through various acts and regulations. The provisions in the Infrastructure Investment and Jobs Act and the IRS’s proposal are the latest additions to this expansive framework.

However, instead of continuing this trend, it’s time to question the premise of such extensive financial surveillance. In a country where the Fourth Amendment is supposed to protect citizens, businesses should not be compelled to report customer information to the government by default. Engaging in activities like using cryptocurrency, receiving money on PayPal, or earning a paycheck should not automatically place citizens on a government database.

Moving away from this surveillance status quo may require significant changes to U.S. law, but it is not a radical idea. A Cato Institute survey revealed that a majority of Americans believe it is unreasonable for banks to share financial information with the government without a warrant.

These principles should guide future discussions and reforms. While the October 30 deadline is imminent, it is crucial for commenters to consider both the implications of the IRS’s proposal and the broader issue of financial surveillance. Ultimately, the responsibility to address these issues lies with Congress, as they have the power to reform the system and protect citizens’ financial privacy.

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Bullish Times is a marketing agency committed to providing corporate-grade press coverage and shall not be liable for any loss or damage arising from reliance on this information. Readers should perform their own research and due diligence before engaging in any financial activities.