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New Infrasture Bill Crypto Issues Draws Musk's Attention

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The bipartisan infrastructure bill in the U.S. could have an impact on the cryptocurrency world. There is the possibility that it could have tax implications on specific cryptocurrencies. Elon Musk has asked lawmakers to avoid picking winners and losers based on tax implications. There is unlikely to be a substantial impact on growth in the United States, especially since the new spending is expected to be limited to $550-billion.

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What is the Infrastructure Bill

The infrastructure bill is a bipartisan bill that is expected to pass through both the House of Representatives and the Senate and reach the desk of the President of the United States. Many economists believe the bill will have a negligible impact on economic growth. The money will be spent on investments in ports and highways. Some provisions will allow money to be spent on broadband, making the virtual economy more productive. The overall measures will not be a needle mover for trading shares.

The $550 billion infrastructure bill might seem like a large chunk of change, but it looks like it’s just a tiny amount of capital when you compare it to the $6 trillion that Congress has issued during the pandemic. Typically, stock trading shares that focus on materials and industrials would benefit from an infrastructure bill that increases spending.

Tax Ramifications Within the Infrasture Bill

The infrastructure bill also has an amendment that can impact cryptocurrency mining and trading. The bill has an amendment that would exempt non-broker entities from the provision. The current version of the bill would broaden the definition of a “broker” to any entity within the cryptocurrency industry that facilitates the transfer of digital currencies. Adding this information to the bill could have significant ramifications on miners and software developers that help provide the backbone of blockchain-related cryptocurrencies. The change would require that miners and software developers track transactions of individuals who are their customers.

In a recent tweet, Tesla CEO Elon Musk urged lawmakers to consider the Senate infrastructure bill’s crypto tax provision. Musk wants to make sure that the legislation does not pick winners and losers based on the technology used to generate the cryptocurrency.  For example, some cryptocurrency technologies do not use blockchain. Bitcoin, for example, is a cryptocurrency that utilizes blockchain. The new legislation would possibly require that miners track all transactions that occur with the bitcoin that they received from mining that cryptocurrency. These new requirements would need exchanges to surveil their customers’ transactions more closely than traditional financial services organizations.

A competing amendment was updated in early August that would exclude proof-of-stake validators and proof-of-work cryptocurrency miners from the crypto tax reporting provision. Senator Warner noted that the new revision was likely the final list of exemptions. So while cryptocurrency miners would probably get a pass if this bill eventually became law, it leaves software developers and decentralized platforms like Coinbase exposed to the new statute. Musk tweeted that “There is no crisis that compels hasty legislation.”

Winners and Losers

The infrastructure bill could easily have some winners and losers. If exchanges are subject to new regulatory exposure, they will need to spend more money creating a framework to follow digital coins. Trading shares of publically issued companies such as Coinbase could be exposed to issues like the infrastructure bill. Coinbase has traded under pressure since its IPO in 2021.  The share price is attempting to find a bottom, but the shares are now overbought. The fast stochastic, which is a momentum oscillator, has increased to 89, well above the overbought trigger level of 80, which could foreshadow a correction in trading shares of the company.

Model Portfolio

The Bottom Line

An infrastructure bill is continuing to be debated in Congress. Most of the bill will focus on new infrastructure, including roads and bridges and data communications. There have been several amendments to the bill, and one is related to those who will experience more hardship in the cryptocurrency space. Initially, part of the infrastructure bill was geared to making the cryptocurrency industry more regulated. Blockchain miners, software developers, and exchanges would be subject to additional regulation. These entities would need to track the transaction of digital coins that were either produced or handled by their companies. The infrastructure bill, as it is written, could pick winners and losers, according to Tesla CEO Elon Musk. Musk has asked Congress to take their time writing this type of bill as it will impact the entire cryptocurrency market. The most recent final amendments have placed cryptocurrency exchanges in the lime-light, which could generate additional regulation for these entities and move trading shares of their publically traded equities.

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