U.S. Senate recently passed $1.2 trillion, bipartisan Infrastructure Investment and Jobs Act, for spending on Infrastructure. Infrastructure package provides for $550 billion of new federal spending. This money will go to roads, bridges, electric grid, high-speed internet access, for upgrading water infrastructure, public transit systems, airport upgradation, installing electric vehicle charging stations, guarding against cyber-attacks etc.
Over the years US spending has largely been outside Us for supporting Defence budget in Iraq, Afghanistan, Syria etc. Bill is truly historic as it provides for spending unprecedented sum of money inside US, for developing infrastructure and will go a long way in creating millions of Jobs for US Citizens. Spending is equal to combined economy of Belgium and Sweden.
The bill is also remarkable in a way that it plans to tax the Digital Currencies by providing a framework for Digital Assets. Taxation may not be good for digital assets industry in its formative years, but it will go a long way in formalizing the existence of digital currencies by using the proceeds of taxes for Nation building.
For integration and growth of Digital Assets with the mainstream financial system, it is necessary that digital assets are supervised and regulated. This step will bring digital assets closer to mainstream financial assets. Bill defines Digital Asset as “digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary”.
However, taxation may have an impact on pushing the Crypto Industry outside US. Presently many states have favourably taxation policy. Wyoming and Colorado have emerged as most Crypto friendly states. Many big crypto firms have started establishing their shops in Wyoming
Key challenge lies in defining the broker under the Act. Under Title VI of the Act, according to Sub- Clause D of Section 80603, Broker includes “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person”.
Definition of bill is wide and vague and may include miners and other players in the ecosystem. Rules are required to define and clear the implications. Also, the estimates of the Joint Committee on Taxation, which opined that $28 billion (over decades) can be realized by taxing Cryptos, may prove to be over optimistic.
Silver lining emerging from the taxation aspects provided in the Bill is that, Digital Assets are coming closer to the mainstream financial system due to central taxes. It also gives an indication that private digital currency may co-exist with the digitised dollar in times to come. The Bank for International Settlement (BIS) has recently supported the development of Central Bank Digital Currencies (CBDCs). From the hindsight we can connect the dot that digital assets are being legalised by central authorities through taxation, especially at a time when the work on sovereign digitised dollar is in progress. This may highlight the long-term strategic intention of US Government to promote private virtual currency in tandem with the proposed digitised dollar in future.
In India, the draft bill on crypto currency is in discussion stage. The bill may not recognize the private currency, but will be an important step in enabling the digitized Indian Currency. This may be the first step in integration of sovereign Indian currency with the Global fin tech evolution.