In March 2021, the Keep Innovation in America Act was initially proposed.
- US legislators intend to resubmit legislation to update the tax reporting rules for cryptocurrencies.
- The Keep Innovation in America Act tries to reduce the scope of what constitutes a cryptocurrency “broker” for taxation.
- The sector would achieve a crucial policy victory with the passing of the new measure.
Lawmakers’ Plan
US legislators from both parties intend to present legislation updating the rules for crypto tax reporting. Representative Ritchie Torres and Patrick McHenry, chairs of the House Financial Services Committee, jointly offered the Retain Innovation in America Act in March 2021. (D-N.Y.). The bipartisan Infrastructure Investment and Jobs Act’s (IIJA) initial crypto tax reporting rules are being improved by the bill.
Narrowing the Definition of a Crypto “Broker”
For taxation purposes, lawmakers want to define a cryptocurrency “broker” more precisely. According to a bill draft, the deadline for brokers to notify the Internal Revenue Service of transactions involving digital assets worth more than $10,000 would be postponed from 2024 to 2026. The definition of “miners and validators,” “hardware and software developers,” and “protocol developers” has also been changed so that they are no longer referred to as brokers.
Addressing Concerns from Crypto Advocates
Crypto proponents have expressed concern about how the law handled digital assets, saying it would have put “impossible-to-fulfill reporting obligations” on non-financial companies like crypto miners and some software suppliers. These issues are addressed in the revised legislation from co-leaders Patrick McHenry, chair of the House Financial Services Committee, and Rep. Ritchie Torres, which also lays restrictions on the federal government’s power to define what a “digital asset” is. The Treasury Department’s discretionary authority to assess what constitutes a “digital asset” is significantly constrained by the Keep Innovation in America Act’s amendments.
Sponsors of the Bill
Reps. French Hill (R-Ark.), who now chairs the House Financial Services subcommittee on digital assets, and David Schweikert (R-Ariz.) have also endorsed the legislation. Reps. Warren Davidson (R-Ohio), Ro Khanna (D-Calif.), Darren Soto (D-Fla.), Eric Swalwell (D-Calif.), and House Majority Whip Tom Emmer are the bill’s returning sponsors.
Litmus Test for the Crypto Industry
Adopting the proposed measure would provide the cryptocurrency industry with a much-needed regulatory victory as it attempts to repair the harm done to its reputation because of the high-profile failures of Terra/Luna in May and FTX in November, which caused ripple effects across the ecosystem. The bill’s effectiveness will be a litmus test for how Congress will govern the bitcoin industry.
Text of the Draft Bill
The draft bill’s language states that accurate and consistent reporting of transactions involving digital assets is required. Congress must act to give the digital asset market legal and regulatory clarity. A clear set of driving regulations encourages innovation and technology.
Conclusion
The “Keep Innovation in America” Act has been reintroduced to improve crypto tax reporting standards and offer much-needed legal and regulatory clarity, which will help maintain the United States’ position as the world leader in crypto technology and innovation. The revised legislation limits the federal government’s authority to define what a “digital asset” is and allays worries expressed by crypto supporters. The bill’s passing would be a significant policy victory for the cryptocurrency sector and promote technology and creativity.
