On first read I don't see anything wrong with this bill. It appears to extend a reporting requirement already applying to cash transfers to other forms of monetary exchange.
I don't see why transferring money via a cryptocurrency vs cash should be subject to different rules.
Your comment is pretty unrelated to the article. It sounds like you're talking about a simple sending of cryptocurrency from one business or individual or another, but that's not what the article is talking about.
It is impossible to report "who" you received an asset from if you received it from a smart contract that is not under the control of any one business or individual. In the cases of most defi contracts, the assets involved are pooled from many thousands of individuals and act as a sort of autonomous market maker.
Cases where criminals obfuscate simple transfers are already prosecuted under money laundering laws, and they are very easy to prosecute because blockchains are a completely open record for anyone to data-mine.
If research into and use of financial smart contracts should be shut down immediately in the US, let them debate and make a law about that. Don't sneak it into a monster bill and pretend that it's about something entirely different.
Did you read the "it imposes reporting requirements that, given the way DeFi works, would make it impossible to comply" part? If that's not wrong I'm not sure what you expect.
Perhaps the best way to deal with these laws is to let the ones that turn a few million innocent people into felons overnight pass, vs whittle them down so it’s just a few thousand (eg based on net worth or transaction size.) The former would never hold given the consequences, the latter would and eventually be ratcheted.
That works - NYC tried to crack down on “unlicensed taxis” when Uber first arrived, so the Port Authority started seizing and towing the cars of people making drop offs at Airports. It was completely arbitrary - if the PA officer didn’t think the people looked enough alike, then the assumption was that it was an illegal taxi. So interracial families, helpful neighbors, etc could all end up being ticketed and their vehicles seized and towed. The sheer idiocy of the whole situation started making the front page of the NY post and a couple weeks later the practice was dropped.
>"Perhaps the best way to deal with these laws is to let the ones that turn a few million innocent people into felons overnight pass"
There are already hundreds if not thousands of these; the average person commits a felony something like once a day. Nobody seems to want to tackle over-criminalization. Many books and articles have been written on the subject, and I invite you to read them.
I think it would be nice if we passed laws that made sense.
If a law is going to turn millions of people into criminals overnight - then you probably need some kind of grandfather clause, or else it's just a bad law.
Tbh the ETH community should probably work with regulators to get a standard for what logs to produce. As it currently stands anyone could generate the reports needed for DeFi on ETH, but it'd take understanding each contact to do it.
If there was a standard eth log to emit then contacts could choose to emit it and then as long as one actor in the environment coalesces all of those logs and reports it then they'd all be in compliance
Except we aren't tracking names, addresses, and SSNs of the holder of each ETH wallet, which is required for the IRS reporting under this proposed amendment to the statute.
Hmm. The article talks about the question of DeFi, where the sender might be a smart contract, making it difficult or impossible to identify any human beings to include in a report.
The issue would seem to be much broader than that, however. What about miner or validator rewards? Is it an implication of the bill that the receipt of digital assets as part of a miner or validator reward would also trigger a reporting requirement, if the block reward exceeds $10,000 in value?
Who would one be able to identify as the person responsible for sending the portion of the reward that is generated by cryptocurrency inflation? And what about miner fees? Would every user that pays miner fees need to be identified?
Even a simple transfer would require a sender to identify themselves both to their recipient and to the miner who mines the block. But how would the miner and the sender even have the physical ability to connect with each other to share this information, even if they wanted to?
It's one thing to make DeFi illegal, or to make participating in DeFi in a compliant manner impractical, it's an entirely different thing to make operating a miner illegal or impractical.
Somehow I doubt this would have been Congress's intent, but might it be the effect of the bill?
I don't understand why people talk about crypto with such venom in their tone. Yes there are scams but there is legitimately interesting innovation happening too.
Interesting mathematic, economic, and computer science ideas are being explored and tested. In the future it may be possible to have a global financial system where the users are in control of their own funds. Isn't that something worth exploring?
The biggest problem is that you could comply in that an ssn could be attached to each transaction, but ssns are both usernames and passwords that are used to authorize transactions and identify a person, so they can't be stored where everyone can read them.
Perhaps if the government switched over to digital signatures instead of SSNs compliance would be possible.
The requirement for secrets only shared with the government in each transaction is what breaks crypto in this instance. Perhaps someone could figure out a way to easily attach secret information that only the government could read to each transaction?
One solution would be that each transaction would have an identity broker attached to it where you would store your verified identity that would send the tax records to the IRS for you on the person the transfer was going to on their behalf, so you wouldn't have to see the SSN of everyone you did business with and likewise.
The key here is to separate custody of funds from knowledge of identity.
Edit: downvotes? Why? Can someone tell me why I'm at least wrong?
Why would this require a court test? It's clearly constitutional (commerce clause) and there are a ton of past legal cases where reporting requirements have been enforced. Any "DeFi" user/creator who tries to keep using those products after this law passes would be well advised to take a plea deal because they would really have no defense.
Why are we not demanding Congress put pending legislation in a suitably architected public git repo, and then hitting it with AI to find out how our "aristocracy" is burning us ahead of the flame application?
Is DeFi what we're officially calling cryptocurrencies now? A quick Google search looks like that's the case but I don't know if DeFi covers anything else that I haven't thought of.
Tangential, but it's preposterously stupid that our legal system works by legislators voting on a giant collection of laws bundled together, rather than separating these things into entities with specific concerns and voting on those.
Shouldn't it be reasonable for someone to think the infrastructure bill is a good idea but this part is not?
My job complains when I make a pull request that includes more than a few hundred lines of code and tells me to break it up into smaller, more readable changes. But for the US govt a 2700 page bill that congressmen get only a couple of days or hours to review seems to be the norm.
The reason for this is that most legislation wouldn't pass without the amendments; the amendments contain 'pork' and special interest legislation that encourages legislators who are on the fence or even mildly opposed, to vote for the bill. Some of the most well-documented examples of this are the amendments to the ACA (Obamacare), which include the infamous 'corn-husker kickback'.
Truthfully, a critical eye at the structure of US government sees an enormously poorly designed system on almost every front except stability. Unfortunately, even if a system could be designed that improves on the failures while maintaining the stability, the US government is so stable that it's nearly impossible to improve (as this requires constitutional amendments, the highest possible hurdle to clear)
The USA may take the concept of "collection of laws bundled together" a bit too far for comfort, but such concept implemented with more moderation is a good one, I may even say a necessary one. Laws often have dependencies between them, a change in one "concern" may affect another negatively, or may simply not bring the desired good without changes to the other one. So it makes sense to bundle such concerns into a all or nothing deal. A simple example would be a bill to build a shipping port in a remote location being bundled with a bill to build a railway and a roadway to said remote location; if one is passed without the other you end up with a useless port or a useless road/railroad.
Unfortunately, anything passed in the senate requires 60 votes or need to be passed during reconcilliation (one bill per year). This is due to the use of the fillibuster to stop anything else from being considered.
I often try to think of a rule that would require simplified bills without just having arbitrary limits. Like, wouldn't it be nice if each thing voted on had to be less than 8 pages (for example) in length instead of 3000. I'm sure there is some downside though like how will we fit all the pork in to this vote??!?
It is the nature of compromise for 50-60 people. The thing that is more stupid in my mind is that they all only care about getting their pork barrel. I don't understand why some don't revoke their support for things that are too blatant. Unfortunately, our political system is all about money in and kickbacks out. Classic system of misaligned incentives.
If the 'someone' is the person who can veto it, then we should expect that 'someone' to sign it into law.
I suppose we get what we allow and what we voted in to office.
It's been a slowly developing problem. There's always been riders to important bills, but so little legislation is made by Congress now. The only opportunity to get anything done is one of the few bills they manage to get their shit together and pass.
I'd be much more entusiastic about a series of bills. Or a Congress more willing and active about legislation from the liberal-wing. At least that'd fit their marketing better.
But the right-wing is incredibly obstructionist. Without serious action the two are just stuck in a staring contest as the judicial and executive suck up all the power and responsibility they leave on the table.
Wow. Read half this thread and had to make an account to reply. Love the deep philosophy tied to economics and crypto.
Imo, I don't care about crypto being crypto, or about paying taxes. In fact, I prefer to pay taxes like income, and for the government to be able to track it, that way banks can more easily incorporate digital asset holdings which will increase the power of bitcoin and therefore the innovation bitcoin provides.
That being said, I suppose it means I agree that you have to go "through the state first."
Abolishing the state? I don't have that visionary capacity, however, certainly taking a step towards a utopia where there are less middle men, lowers the wealth gap therefore. Furthermore, technology is ultimately what will one day lead us to renewable energy sources, genomics which can help us understand anxiety and depression better, and oh yeah. Space travel :) So using the state to prop up bitcoin sounds like the much more efficient idea. The term "crypto" in itself is a slap in the face, therefore, imo. We want to take a step towards limiting the states power, but not so much of a step to arise heavy social movements against bitcoin via state supported propaganda.
That being said, I loved the example of saying that I am not liable for knowing who held my cash before I did when going to a bank ATM. The bank, however, is required to verify incoming funds are not tied to illegal activities. That being said, the bank only has to verify the identify of the person sending funds to them directly, not investigate where the funds came prior. They then work with the IRS, simply to report any sums coming in over a certain dollar amount, and perhaps any funds that fail some sort of security verification tied to hacking.
I read that identify verification of bitcoin users can be time consuming, so I have tried to find out which software would allow banks to easily track an identity. It could, come to pass that exchanges that do not disclose identities of funds when transferring funds, will not be able to interact with banks in the future, and/or, they will not be allowed to operate in the US at all.
I would be more than fine with that. I am all for the protection of privacy in many areas, but I still believe in paying taxes, and so I don't expect privacy on the movements of my assets when they are tied to income. Now if I send 1M to someone. To me, it becomes the liability of the person receiving that amount and/or their exchange or bank to report it, not me, as I'm not the one making income. Now if I report it as a loss to avoid taxes, then yes, I would expect less privacy in that case.
Now, when I buy from an exchange and bits come from everywhere, that makes the exchange liable not me, and yes they should have an accessible list of identities for any subpoenas looking for crime, however, without a crime, they should only have to actually report large amounts transferring from person to person, or report income made from selling an asset. That list would make it easy, if the IRS was investigating someone, to compare that number to a person's reported income. It should not be that difficult really, but trying to avoid it? That seems like a good way for exchanges to get investigated or barred from activity.
Even still, some exchanges will comply, and investors can simply shift to them, or they can go to non US exchanges, but if they ever bring that money back into the US, then it would be reported over a certain dollar amount by that receiving exchange etc.. etc...
So I don't really see a complex issue really, unless no exchange is operating in a way that would comply with normal income reporting tax code. I'd like to know which exchange is or is not.
As far as feudalism and market makers who benefit more than "the common people." Ultimately that comes down to the ability to prosper, thrive, find freedom, life liberty and the pursuit of happiness. Having more control and more money, like jeff bezos, isn't going to yield enough happiness to say that is a worthy end goal, because it still falls short on several accounts: Spiral Dynamic Theory, Maslow's Heirarchy, and perhaps Map of Consciousness theory. A person benefiting more than the social environment around them, creates alienation and creates existential angst.
Therefore, what bitcoin is to me... is the promise of expanded innovation. If the whole world can communicate better through fair global trade through blockchain, and advanced circuitry leads us one day to clean, renewable energy, the entire base line of global culture will rise, and everyone ends up benefiting equally.
Having more money than someone else, ultimately is a minimal factor in comparison to the whole ecosystem improving, and that is what I believe bitcoin is bringing.
So yeah. Crypto due to untrust of state. I get it, and I agree, but sometimes innovation is more about learning how we can all work together, and that ultimately is what decentralization is supposed to do.
We just have to pay our taxes in the mean time, bc learning to decentralize, does not mean we will have the millions of advancements needed to tie in to that decentralization to effectively roll out a new culture. It may take 100 years...
Like when we went into Iraq. Great idea to take out a dictator, but how to do reconstruction and build a new culture? Woops. NO IDEA.
An initial great idea needs a long time to develop to truly understand its applications, and it seems much more beneficial to get the state behind bitcoin than to buck the system.
But if for example I have to pay a higher short term gains rate than I do other income? Then I would not be happy.
Oh, and the market makers, the nodes, have incentive to operate, so capitalism is built into the code. Decentralization combined with capitalism, seemed to be the right call for our current state in evolution per spiral dynamic theory.
[+] [-] danny_codes|4 years ago|reply
I don't see why transferring money via a cryptocurrency vs cash should be subject to different rules.
[+] [-] woah|4 years ago|reply
It is impossible to report "who" you received an asset from if you received it from a smart contract that is not under the control of any one business or individual. In the cases of most defi contracts, the assets involved are pooled from many thousands of individuals and act as a sort of autonomous market maker.
Cases where criminals obfuscate simple transfers are already prosecuted under money laundering laws, and they are very easy to prosecute because blockchains are a completely open record for anyone to data-mine.
If research into and use of financial smart contracts should be shut down immediately in the US, let them debate and make a law about that. Don't sneak it into a monster bill and pretend that it's about something entirely different.
[+] [-] I_am_tiberius|4 years ago|reply
[+] [-] gfodor|4 years ago|reply
[+] [-] zxcvbn4038|4 years ago|reply
[+] [-] nickff|4 years ago|reply
There are already hundreds if not thousands of these; the average person commits a felony something like once a day. Nobody seems to want to tackle over-criminalization. Many books and articles have been written on the subject, and I invite you to read them.
[+] [-] alyandon|4 years ago|reply
[+] [-] Taek|4 years ago|reply
[+] [-] onlyrealcuzzo|4 years ago|reply
If a law is going to turn millions of people into criminals overnight - then you probably need some kind of grandfather clause, or else it's just a bad law.
[+] [-] X6S1x6Okd1st|4 years ago|reply
If there was a standard eth log to emit then contacts could choose to emit it and then as long as one actor in the environment coalesces all of those logs and reports it then they'd all be in compliance
[+] [-] coleca|4 years ago|reply
[+] [-] legutierr|4 years ago|reply
The issue would seem to be much broader than that, however. What about miner or validator rewards? Is it an implication of the bill that the receipt of digital assets as part of a miner or validator reward would also trigger a reporting requirement, if the block reward exceeds $10,000 in value?
Who would one be able to identify as the person responsible for sending the portion of the reward that is generated by cryptocurrency inflation? And what about miner fees? Would every user that pays miner fees need to be identified?
Even a simple transfer would require a sender to identify themselves both to their recipient and to the miner who mines the block. But how would the miner and the sender even have the physical ability to connect with each other to share this information, even if they wanted to?
It's one thing to make DeFi illegal, or to make participating in DeFi in a compliant manner impractical, it's an entirely different thing to make operating a miner illegal or impractical.
Somehow I doubt this would have been Congress's intent, but might it be the effect of the bill?
[+] [-] WalterGR|4 years ago|reply
Rider (legislation) https://en.m.wikipedia.org/wiki/Rider_(legislation)
[+] [-] serverholic|4 years ago|reply
Interesting mathematic, economic, and computer science ideas are being explored and tested. In the future it may be possible to have a global financial system where the users are in control of their own funds. Isn't that something worth exploring?
[+] [-] narrator|4 years ago|reply
Perhaps if the government switched over to digital signatures instead of SSNs compliance would be possible.
The requirement for secrets only shared with the government in each transaction is what breaks crypto in this instance. Perhaps someone could figure out a way to easily attach secret information that only the government could read to each transaction?
One solution would be that each transaction would have an identity broker attached to it where you would store your verified identity that would send the tax records to the IRS for you on the person the transfer was going to on their behalf, so you wouldn't have to see the SSN of everyone you did business with and likewise.
The key here is to separate custody of funds from knowledge of identity.
Edit: downvotes? Why? Can someone tell me why I'm at least wrong?
[+] [-] bradwood|4 years ago|reply
What is more concerning is that legislators can come up with this clearly unworkable law without doing a modicum of research.
[+] [-] josho|4 years ago|reply
Today if I have a cash transaction greater than $10k I have to report it. This bill just clarified that cash includes digital assets.
Is your issue with the existing law or you feel crypto shouldn’t be treated like cash?
[+] [-] rasengan|4 years ago|reply
I think they know exactly what they are doing.
[+] [-] elil17|4 years ago|reply
[+] [-] malermeister|4 years ago|reply
If this law is incompatible with DeFi, it is DeFi that is unworkable, not the law.
[+] [-] smitty1e|4 years ago|reply
[+] [-] jimbob45|4 years ago|reply
[+] [-] ALittleLight|4 years ago|reply
Shouldn't it be reasonable for someone to think the infrastructure bill is a good idea but this part is not?
[+] [-] idrios|4 years ago|reply
[+] [-] nickff|4 years ago|reply
[+] [-] helen___keller|4 years ago|reply
[+] [-] SkeuomorphicBee|4 years ago|reply
[+] [-] CabSauce|4 years ago|reply
[+] [-] breadzeppelin__|4 years ago|reply
[+] [-] UnpossibleJim|4 years ago|reply
[+] [-] snarf21|4 years ago|reply
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] landemva|4 years ago|reply
[+] [-] aspaceman|4 years ago|reply
I'd be much more entusiastic about a series of bills. Or a Congress more willing and active about legislation from the liberal-wing. At least that'd fit their marketing better.
But the right-wing is incredibly obstructionist. Without serious action the two are just stuck in a staring contest as the judicial and executive suck up all the power and responsibility they leave on the table.
[+] [-] jrochkind1|4 years ago|reply
And who actually writes it? Often industry. In this case maybe law enforcement?
[+] [-] Soul3000|4 years ago|reply
Imo, I don't care about crypto being crypto, or about paying taxes. In fact, I prefer to pay taxes like income, and for the government to be able to track it, that way banks can more easily incorporate digital asset holdings which will increase the power of bitcoin and therefore the innovation bitcoin provides.
That being said, I suppose it means I agree that you have to go "through the state first."
Abolishing the state? I don't have that visionary capacity, however, certainly taking a step towards a utopia where there are less middle men, lowers the wealth gap therefore. Furthermore, technology is ultimately what will one day lead us to renewable energy sources, genomics which can help us understand anxiety and depression better, and oh yeah. Space travel :) So using the state to prop up bitcoin sounds like the much more efficient idea. The term "crypto" in itself is a slap in the face, therefore, imo. We want to take a step towards limiting the states power, but not so much of a step to arise heavy social movements against bitcoin via state supported propaganda.
That being said, I loved the example of saying that I am not liable for knowing who held my cash before I did when going to a bank ATM. The bank, however, is required to verify incoming funds are not tied to illegal activities. That being said, the bank only has to verify the identify of the person sending funds to them directly, not investigate where the funds came prior. They then work with the IRS, simply to report any sums coming in over a certain dollar amount, and perhaps any funds that fail some sort of security verification tied to hacking.
I read that identify verification of bitcoin users can be time consuming, so I have tried to find out which software would allow banks to easily track an identity. It could, come to pass that exchanges that do not disclose identities of funds when transferring funds, will not be able to interact with banks in the future, and/or, they will not be allowed to operate in the US at all.
I would be more than fine with that. I am all for the protection of privacy in many areas, but I still believe in paying taxes, and so I don't expect privacy on the movements of my assets when they are tied to income. Now if I send 1M to someone. To me, it becomes the liability of the person receiving that amount and/or their exchange or bank to report it, not me, as I'm not the one making income. Now if I report it as a loss to avoid taxes, then yes, I would expect less privacy in that case.
Now, when I buy from an exchange and bits come from everywhere, that makes the exchange liable not me, and yes they should have an accessible list of identities for any subpoenas looking for crime, however, without a crime, they should only have to actually report large amounts transferring from person to person, or report income made from selling an asset. That list would make it easy, if the IRS was investigating someone, to compare that number to a person's reported income. It should not be that difficult really, but trying to avoid it? That seems like a good way for exchanges to get investigated or barred from activity.
Even still, some exchanges will comply, and investors can simply shift to them, or they can go to non US exchanges, but if they ever bring that money back into the US, then it would be reported over a certain dollar amount by that receiving exchange etc.. etc...
So I don't really see a complex issue really, unless no exchange is operating in a way that would comply with normal income reporting tax code. I'd like to know which exchange is or is not.
As far as feudalism and market makers who benefit more than "the common people." Ultimately that comes down to the ability to prosper, thrive, find freedom, life liberty and the pursuit of happiness. Having more control and more money, like jeff bezos, isn't going to yield enough happiness to say that is a worthy end goal, because it still falls short on several accounts: Spiral Dynamic Theory, Maslow's Heirarchy, and perhaps Map of Consciousness theory. A person benefiting more than the social environment around them, creates alienation and creates existential angst.
Therefore, what bitcoin is to me... is the promise of expanded innovation. If the whole world can communicate better through fair global trade through blockchain, and advanced circuitry leads us one day to clean, renewable energy, the entire base line of global culture will rise, and everyone ends up benefiting equally.
Having more money than someone else, ultimately is a minimal factor in comparison to the whole ecosystem improving, and that is what I believe bitcoin is bringing.
So yeah. Crypto due to untrust of state. I get it, and I agree, but sometimes innovation is more about learning how we can all work together, and that ultimately is what decentralization is supposed to do.
We just have to pay our taxes in the mean time, bc learning to decentralize, does not mean we will have the millions of advancements needed to tie in to that decentralization to effectively roll out a new culture. It may take 100 years...
Like when we went into Iraq. Great idea to take out a dictator, but how to do reconstruction and build a new culture? Woops. NO IDEA.
An initial great idea needs a long time to develop to truly understand its applications, and it seems much more beneficial to get the state behind bitcoin than to buck the system.
But if for example I have to pay a higher short term gains rate than I do other income? Then I would not be happy.
Oh, and the market makers, the nodes, have incentive to operate, so capitalism is built into the code. Decentralization combined with capitalism, seemed to be the right call for our current state in evolution per spiral dynamic theory.
[+] [-] sharmin123|4 years ago|reply
[deleted]
[+] [-] bob229|4 years ago|reply
[deleted]