Legislation has affected crypto more significantly than any other single reason over the past two years. Just recently, the senate passed the inflation reduction act which is likely to also affect crypto. Let’s break down what is happening in due course of the act.
Highlight of the Inflation Reduction Act regarding crypto
The IRS will receive an additional $80 billion over a 10 year timeframe. This is a 75% increase in annual spending for the IRS, and has been authorized for the purpose of system modernization, taxpayer services, and hiring/training new auditors.
How this affects crypto in the US
While it has been stated that the IRS changes will only affect taxpayers who are above the $400,000 per year bracket, the likely scenario is tightening scrutiny on all crypto related actions, regardless of tax bracket. With the majority of funding set to be used for compliance and enforcement (and enhancing producible data), crypto users will be advised to take extra caution and seek advise from a tax professional when participating in any activity with cryptocurrency. Here’s a piece from the act itself:
“ENFORCEMENT.—For necessary expenses for tax enforcement activities of the Internal Revenue Service to determine and collect owed taxes, to provide legal and litigation support, to conduct criminal investigations (including investigative technology), to provide digital asset monitoring and compliance activities.”
Certainly, tax obligation is a must now when using crypto in the US, and this alone is likely to deter many people from participating. While direct laws that state clear dos and don’ts are not set in stone yet, this moves the US a step closer to mainstream crypto adoption. Unfortunately, the inflation reduction act suppresses crypto somewhat in the process by deterring users with its vague but harsh repercussions around using digital currency.
