They argue that a statute creating felony crimes for digital asset users merits an open debate instead of being quietly included in a pending bill.
“The proposed amendment to Section 6050I states that, in a broad range of scenarios, ‘any person’ who receives over [USD] 10,000 in digital assets must verify the sender’s personal information, including Social Security number, and sign and submit a report to the government within 15 days. Failure to comply results in mandatory fines and can be a felony (up to five years in prison),” the report said.
The proposal relies on a law from 1984 that was drafted to discourage in-person cash transfers and encourage the use of financial institutions for major transactions. But the provisions that were relatively clear some 37 years ago are difficult to apply to digital assets, causing compliance to be unduly burdensome, the POSA said.
This is because “any ‘receipt’ can trigger the reporting requirement, and ‘digital asset’ is defined broadly as any ‘digital representation of value’ using distributed ledger technology, including [non-fungible tokens] NFTs,” according to the report.
Because of this, crypto miners, stakers, lenders, decentralized application and marketplace users, traders, businesses and individuals who have any exposure to digital assets – are all at risk of being subject to the controversial requirement, “even though in most situations the person or entity in receipt is not in the position to report the required information,” the report’s authors said.
Based on its analysis of the provision, the POSA concludes that all the above groups must report received digital assets triggering the USD 10,000 threshold, or otherwise face fines or prison.
There are, however, three exceptions that apply: receipts by financial institutions; receipts that were already reported under the Bank Secrecy Act; and foreign transactions.
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Learn more:
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– SEC Chief May be Gunning for Crypto Exchanges and Altcoins
– Coinbase vs. ‘Sketchy’ SEC Case Reminds of Crypto Regulation Challenges
– Bitcoin Miners Adapt Fast As EU Mulls ‘Climate-Friendly Cryptoassets’
– ‘Don’t Be Lulled’ as European Commission Mulls a Crypto KYC Trap
