Why we need to introduce cryptocurrency reports

– The cryptocurrency tax provisions of the US Infrastructure Act have dramatic consequences for any institution that has included digital assets in its investment portfolio or payment plan. This includes millions of companies, platforms, individuals, and mutual funds.

For the first time, the bill defines digital assets and intermediaries for those digital assets. This is an important first step in the regulatory process, from definition to reporting to detailed rules and compliance obligations. It's a big deal," Rob Massey, global and US leader in tax blockchain and digital assets, told Deloitte. clarity over time. But for the first time, a digital asset is codified as "any digital representation of value recorded in a cryptographically protected distributed ledger or similar technology, as defined by the Treasury," again leaving room for later clarification by the Treasury.

New reporting standards that will cover the cryptocurrency market require a definition of what a digital asset is and who is considered to represent it. For some, this may be a painful departure from the illegitimate, anonymous and amorphous ethos that has run the crypto since the creation of Bitcoin 13 years ago.

However, many in the industry see this as a positive development as regulation enables innovation, reduces risk and makes it easier to enter the market. “The industry is not static and it moves very fast,” said Erin Fenimore, Head of Global Tax Reporting at TaxBit. "Clear liability rules for companies entering the industry give them peace of mind, and the same is true for big brands entering the industry."

The ideal regulatory environment is clear but also flexible. And in the first step in building a regulatory structure around crypto, US authorities are careful to balance these two aspects. This is great because it allows access to the crypto market for others who are concerned about the risk of making a mistake and getting into trouble with regulators. When we look at clarity, you may not like how clarity is created, but at least we have clarity, and it allows innovation to move forward. This enables businesses to facilitate digital asset transactions.

For Fennimore, nuance is the level of flexibility available to regulation as the industry changes and evolves. “A very clear lack of regulation is the inability to keep up with and adapt to future innovations,” he said. “This is an interpretation dance that we play. We need regulations that are dynamic enough to change with the industry. And I think that's a big challenge."

As Winston Churchill once said, this is neither the end nor the beginning of the end, but it seems to be the end of the beginning. This is the first step in the long-awaited regulatory embrace of the US crypto market. It remains to be seen how flexible - or restrictive - the rules will become. But the direction of the movement is clear and should be welcomed.

moderated by Quincy Enoch, Co-Chair of the Financial Services Group at Invariant.