The Unworkable Law: Why a 2021 Guideline Is Causing a Tax Problem for the Crypto Market
U.S. Senator Cynthia Lummis is advising Congress to modify current tax policies affecting Bitcoin and other digital possessions, alerting that the existing structure imposes unfair burdens on miners, developers, and decentralized financing (DeFi) individuals. The post The Impracticable Law: Why a 2021 Rule Is Triggering a Tax Nightmare for the Crypto Industry appeared initially on Coin Edition.
Lummis seeks immediate crypto tax reform to avoid double taxation on miners and DeFi users. 2021 law’s “broker” definition draws criticism for requiring unreachable user information. Congress weighs crypto bills as Lummis promotes reconciliation to ease compliance guidelines. U.S. Senator Cynthia Lummis is advising Congress to revise current tax policies affecting Bitcoin and other digital properties, alerting that the existing structure imposes unreasonable problems on miners, developers, and decentralized finance (DeFi) participants. In a declaration published on X, the Wyoming lawmaker cited specific defects in the category and reporting requirements for crypto-related activities, which she argues are blocking development and creating significant compliance obstacles throughout the American crypto sector. Lummis Emphasizes “Double Taxation” for Miners and Unfair DeFi Rules Amongst the major concerns raised, Senator Lummis indicated the treatment of Bitcoin miners under current tax policies. She argued that miners are effectively based on double tax– initially when they receive block rewards and again when they offer their holdings. This approach, she alerted, puts an excessive monetary burden on the extremely participants who work to maintain and secure the blockchain’s facilities. The very same concern reaches DeFi users, where regular on-chain interactions can activate several taxable events through various smart contract executions, even in cases where users have not recognized any actual earnings. Lummis highlighted that the existing structure can develop tax liabilities without corresponding capital gains, which severely makes complex tax reporting. Related: No Crypto Tax? White House ‘Czar’ Shoots Down Transaction Charge The Core Issue: A Flawed “Broker” Meaning in 2021 Facilities Law Lummis’s remarks appear to target the IRS policies that came from the Infrastructure Financial Investment and Jobs Act passed in 2021. That legislation introduced an extremely broad definition of a crypto “broker,” which might be translated to consist of miners, software application developers, and node operators. Under the law, these participants are required to report sensitive user information, such as names and deal data– details that, due to the pseudonymous and decentralized nature of their functions, they frequently do not collect or have access to. Market stakeholders have long voiced concerns that these reporting needs are technologically unfeasible. A Path Forward: Lummis Promotes a Legal Fix To attend to these obstacles, Senator Lummis is requiring the use of the reconciliation procedure, a legislative procedure that permits the Senate to modify tax-related laws with an easy majority vote. She advocated for a crucial fix: narrowing the definition of a crypto “broker” to omit entities that do not carry out direct intermediary services or have access to user data. Related: Senators Lummis & Moreno New Proposal Might Mean Companies Just Pay Crypto Tax on Realized Gains Her push comes as Congress continues to think about other significant legislation for the digital possession space, with the GENIUS Act arranged for a cloture vote this week and the clearness Act also progressing through the legal process.
Lummis looks for immediate crypto tax reform to avoid double tax on miners and DeFi users. Lummis Highlights “Double Tax” for Miners and Unfair DeFi Rules Among the major concerns raised, Senator Lummis pointed to the treatment of Bitcoin miners under existing tax guidelines. A Path Forward: Lummis Presses for a Legislative Fix To resolve these obstacles, Senator Lummis is calling for the use of the reconciliation procedure, a legal treatment that allows the Senate to change tax-related laws with an easy majority vote.
