Why is the U.S. infrastructure bill controversial? FTX founder explains
FTX founder discussed the recent U.S. infrastructure bill that has stirred up the cryptocurrency community, even though the bill has not been finalized and is in a state of chaos, he still attempted to explain it in plain language. In addition to acknowledging exchanges falling within the regulatory scope, he also mentioned the concerns that most people have about the bill.
Table of Contents
Initial Version
FTX founder Sam Bankman-Fried, referred to as SBF, released a series of tweets, explaining the initial version of an infrastructure bill that requires "cryptocurrency brokers" to regularly provide tax reports.
The main idea is for exchanges to regularly provide user trading information to the IRS for tax purposes, but the initial bill defines a "Broker" as "any person who is responsible for providing regular services that enable digital asset transactions to occur."
No Objection from Regulated Exchanges
As the owner of the U.S. exchange ftx.us, SBF believes that cryptocurrency tax revenue is often underestimated, and providing tax reports is reasonable and is happy to cooperate with regulatory agencies.
Concerns
The bill's initial definition includes:
- Providing "services to effectuate the transfer of digital assets"
- Profiting from it
SBF points out that with this definition of a Broker, the DeFi sector will become very confused.
Are Ethereum miners included? The blocks they mine may involve transactions from decentralized exchanges (DEXs). Do they facilitate the "transfer of digital assets"? It seems so, and they also receive block rewards, which is a concern.
Definition too broad
SBF believes the definition is too broad, covering miners, stakers, non-custodial wallet providers.
Miners are not responsible for specific transactions; they simply process any broadcasted transactions, they are not Brokers, they just relay messages within the blockchain network, some of which happen to be related to transactions.
No increase in tax revenue, miners may leave
SBF believes that it is very difficult for miners to comply, and it may even be impossible, so tax revenue will not increase, leading to the decline of mining and miners leaving.
There are many questions, miners should not be the ones providing tax reports, then who should? Who needs to provide tax reports related to decentralized exchange APIs? I don't know, it's complicated, but miners are definitely not the answer.
Revised Bill Emerges
As previously reported, Senators Ron Wyden, Pat Toomey, and Cynthia Lummis have introduced an amendment that excludes the following roles:
- Validation nodes
- Cryptocurrency developers
- Software and hardware wallet issuers
SBF believes that this amendment has already restricted the main definition to "U.S. centralized exchanges," resolving many issues. However, according to the latest news, the amendment supported by the White House only excludes "PoW miners" and "software and hardware wallet issuers," but still awaits a vote.
Appendix: How to Calculate Your Cryptocurrency Trading Tax Base?
SBF finally mentioned how to calculate the trading tax base, starting with a common example that everyone knows:
- Bob buys 10 bitcoins at an average price of $10,000
- Bob sells 10 bitcoins at an average price of $12,000
In this example, Bob may have a taxable profit of $20,000, but the cryptocurrency field is not that simple. The tax report provided by a "single" exchange might look like this:
- Bob deposits 10 bitcoins
- Bob sells 10 bitcoins at an average price of $12,000
It's difficult to calculate Bob's losses in this scenario, SBF explains:
Bob sold bitcoins on FTX, but he bought them elsewhere, not on FTX, FTX needs to submit tax reports, but is not obliged to extract information from all exchanges. Therefore, to calculate Bob's true taxable profit, it should be:
Coinbase:
- Bob buys 10 bitcoins at an average price of $9,000
- Bob withdraws 10 bitcoins
FTX:
- Bob deposits 10 bitcoins
- Bob sells 10 bitcoins at an average price of $12,000
Bob's taxable profit is $30,000.
SBF states that regulation is imminent and has already been involved in certain specific situations, emphasizing willingness to cooperate with regulatory agencies to achieve goals and even assist in setting regulations suitable for the cryptocurrency industry.