- The lack of understanding of the cryptocurrency sector has become even more apparent thanks to the Infrastructure Bill chaos
- Lawmakers fail to see that the bill would decimate the cryptocurrency sector and would ultimately fail in its key aim to raise money through taxes
- This lack of foresight highlights more than ever the need for education at the highest level
The new cryptocurrency element of the U.S. Infrastructure Bill, described by crypto lawyer Jake Chervinsky as “literally impossible” to comply with, is yet another example of the lack of education lawmakers have of the way that blockchain and cryptocurrency works. Worse, it also underlines the lack of foresight that such individuals have when it comes to the impact it would have on the U.S. cryptocurrency and blockchain industry, which demands one of the richest talent pools in the current market.
When ‘Broker’ Could Mean Broke
The crypto element of the infrastructure bill calls for almost every cryptocurrency-handling operation, from software wallet operators to Bitcoin miners, to fall into the same bracket as traditional brokers. This means they would need to collect a raft of information on their users or customers, including personal information such as names, addresses, phone numbers and the like. The wording of the bill has since been amended to reduce the scope, and may be further amended, but the fact remains that it is nearly impossible for operations caught in this net to meet such demands. This isn’t due to a lack of desire, it is down to the mechanics of the blockchain system.
Most crypto mining companies, wallet operators, exchanges and the like recognize that regulation is coming and that if they want to have any kind of future in the space then they need to cooperate and adapt to regulations in order to survive. The genuine operators are law abiding companies who want to do the right thing in order to stay in the space, but the very essence of the way the blockchain works is that information of the kind required by legislators is, by its very design, not openly revealed.
Users Would Abandon Information-gathering Companies
The only way such measures could be put in place is if the companies in question forced users to sign up for their services, handing over personal information for each and every transaction. Such a system would raise huge privacy and feasibility issues, with the demands of implementing such a system forcing many out of business
Even if the measures were somehow put in place and every transaction began collecting such information, users would simply abandon those companies and source other non-U.S. entities as much as possible. This would result in a collapse of the U.S. crypto system, forcing a huge swathe of those companies under and raising a fraction of what the government could collect in taxes, whilst also allowing other countries to take the initiative in the blockchain race.
Education Before Legislation
The fact that lawmakers are unable to see the ramifications of their actions and how they could end up being utterly self-defeating starkly highlights the lack of education on the matter. They seem to think that collecting such information is perfectly feasible and will result in only a negligible drop in trade, when in fact it would result in far less tax being collected while castrating the burgeoning U.S. crypto ecosystem.
We can’t expect lawmakers to bow to the privacy-focused machinations of blockchain technology, but the existing regulatory frameworks slowly being built are far more progressive and will help protect the core of the industry while ensuring that financial crime is minimized. It may not be perfect, but it’s a damn sight better than a disastrous move such as that being proposed for the Infrastructure Bill.