By Frances Yue
Hi there. Welcome to Distributed Ledger, our weekly crypto newsletter that will reach your inbox every Thursday. I’m Frances Yue, crypto reporter at MarketWatch, and I’ll walk you through the latest and greatest in digital assets this week so far.
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Crypto in a snap
Major cryptocurrency prices have been retreating since Tuesday, after a controversial infrastructure bill was signed into law by President Biden on Monday. Bitcoin /zigman2/quotes/31322028/realtime BTCUSD -0.92% was recently trading at around $58,250, down 7.5% over the past seven days, according to CoinDesk data. For the seven days ending Nov. 16, the cryptocurrency fell 10.7%, the largest seven-day decline since Sept. 25, according to Dow Jones data.
Ether /zigman2/quotes/108573964/realtime ETHUSD +0.93% recorded a loss of about 12.8% over the past seven days, on pace for its largest seven-day decline on Sept. 25, according to Dow Jones data. Dogecoin /zigman2/quotes/226077044/realtime DOGEUSD +1.60% was down 13.2% over the past seven days, its largest seven-day decline since Sept. 29. Shiba Inu logged a loss of 20.8% over the past seven days.
|Biggest Gainers||Price||% 7-day return|
|Source: CoinMarketCap.com as of Nov. 18|
|Biggest Decliners||Price||% 7-day return|
|Source: CoinMarketCap.com as of Nov.18|
On Monday, President Joe Biden signed into law a $1 trillion infrastructure bill, which contains a provision that would require brokers of digital assets to record and report transactions to the Internal Revenue Service starting 2023.
Similar to what stock brokers do via tax form 1099, crypto brokers will be required to record their gross proceeds and capital gains or losses and track them for both IRS and customers. The brokers also need to disclose information including taxpayers’ names and addresses.
Meanwhile, the provision would require any business that receives more than $10,000 in digital assets to report the transactions to the IRS.
The provision has drawn controversy as the crypto community complained that the definition of “broker” is too broad, as it doesn’t explicitly rule out miners, node operators, stakers, software developers and wallet providers. According to the provision, brokers refer to anyone “responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.”
In response, the U.S. Treasury Department said in August that developers, miners and software providers in the crypto industry will not be targeted by the rules.
Some in the crypto industry also argued that the provision is not friendly on privacy grounds, especially as crypto people are usually privacy-conscious.
However, the new tax reporting requirements may benefit the crypto industry in the long term, according to James Angel, finance professor at Georgetown University.
“This is a step forward in the maturation of the crypto world,” Angel told MarketWatch in a phone interview. “In order for this technology to achieve its potential, it has to fit in with the regulated world,” Angel said.
“If you sell a stock and you make a profit on it, you have to pay tax on that,” according to Angel. “So if you sell the crypto and you profit from it, you should pay tax on that just as if you sold the Tesla shares that went up. It’s really a matter of fairness.”
Ben Cruikshank, head of Flourish, a company that offers financial advisors access to cryptocurrency investing, said that advisors are generally positive about the new tax reporting requirements for crypto.
“Advisors and their clients want their tax lives just like their financial lives to be simple,” Cruikshank said. “They want their transactions reported in 1099. They don’t want to have to worry about it that nobody tracked my basis over here or nobody’s even reporting to the government over here.”
Antoine Scalia, CEO of crypto accounting platform Cryptio, said that the rules may be hard to implement when it comes to decentralized crypto exchanges and on-chain activities.