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Explaining the infrastructure bill's impact on cryptocurrency

In this article:
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CoinDesk Learn Editor Ollie Leech explains why the cryptocurrency community isn't excited about the bipartisan infrastructure bill.

Video Transcript

- Something else to understand is what's going on in the Crypto Corner. And we want to bring in Ollie Leech, Coindesk Learn Editor. Lot to talk about here. I mean, I got Bitcoin back above $46,000. But I can't avoid the elephant in the room.

We saw the PolyNetwork, the decentralized finance platform that got hacked. Apparently, the hackers have returned, what, about a third of the 600 million that was stolen. But what is the message that this is sending to investors and to the crypto world?

OLLIE LEECH: Yeah, it's a really interesting story, actually. Like you said, you know, over $260 million has been returned. SlowMist, a blockchain-based security team was able to somehow uncover the hacker's mailbox, IP, fingerprints. And a lot of the industry got together-- [INAUDIBLE], Binance, a lot of these leading exchanges acknowledged the attack and were going to help blacklist these addresses to try and cut off the hackers' escape routes.

And it's a real great sign to show that the industry's working together to try and clamp down on these hacks. And it worked, you know? So much so that these hackers actually said, you know what? We're going to hand this back. We know that we're in a lot of trouble now. We know that it's going to be very difficult for us to offload these funds. And so yeah, it's a huge precedent. And hopefully it can continue.

SEANA SMITH: Ollie, I'm curious, though, it didn't really seem to move the price of Bitcoin or some of the other cryptocurrencies too much. Why do you think that is?

OLLIE LEECH: Yeah, it's a weird one, really. You'd think, you know, with the infrastructure bill, the 600 million hack, like these normally are things that would impact its price, and yet we've seen Bitcoin's back above $46,000, up 57, sorry, percent on the year. Maybe institutions are just not taking notice of this.

I mean, the fact that a lot of the funds have been returned now kind of takes the sting out of that story, perhaps. But yeah, we didn't even see a candle dip on that announcement. It was very much DeFi-based, so potentially that might be a reason why Bitcoin's price didn't drop.

But then it's saying that Ethereum's also doing particularly well right now. I don't know, maybe the market's maturing, maybe we're just kind of not fazed by these things that we were before. But it's certainly interesting to kind of follow and see how these things are impacted as we go forward.

- Ollie, help us understand the infrastructure bill here in the United States, the failure to amend the portion of the bill that deals with cryptocurrency. And I think it's tax reporting. I don't-- I personally don't understand it. So help us and other investors understand why the crypto world is a little concerned about this.

OLLIE LEECH: Yeah, sure, it's a wild story. So yeah, so bear with me. So basically, as we know, the Biden administration's infrastructure bill is going to spend a trillion dollars to improve various areas of the United States. And a lot of people are saying, well, where is this trillion dollars going to come from.

And one area proposed is by improving tax compliance around cryptocurrencies and addressing that issue. And it's something that they reckon can bring in around 28 billion dollars over the next 10 years. But what's worrying, like you said, and this is what's causing the uproar in the crypto space, is there's a proposal to expand the definition of a broker for the Internal Revenue Code of 1986 to include anyone who is responsible for and regularly providing any service affecting transfers of digital assets, which is incredibly vague.

And this is what people are concerned about. It's something that could easily extend to a whole host of crypto businesses, for miners, like software developers, crypto startups, hardware manufacturers, and a lot of people who don't custody customer assets. But as it stands, you know, anyone who falls under this new definition could have to comply with IRS reporting requirements for brokers.

So they'd have to collect user data, like their names, addresses, any transactions that they have. And this could be a disaster for digital privacy, you know? This is what Electronic Frontier Foundation has said recently. There was a bipartisan amendment put forward by senators Ron Wyden, Cynthia Lummis, and Pat Toomey to change the wording and the scope of the broker to try and mitigate some of this damage that it could do.

But unfortunately the White House and Treasury Department weren't on board and support an alternative amendment. But consequently, the Senate voted to advance the bill without considering either amendments. And in the end, kind of as a last minute attempt to try and sort of fix this, senators Toomey, Portman, Sinema, Warner, and Lummis then decided on a compromise to try and merge their competing amendments.

But they had to get unanimous consent to add it to the bill. And unfortunately, Richard Shelby, Senator Richard Shelby, objected to it, meaning that we've now gone back to the original phrasing, which is the thing that caused all this problem in the first place. So there's a real problem, a real risk that a lot of the businesses could relocate overseas over this.

- Impressive, considering that you are on, what is it, the Eastern side of the United Kingdom, talking about US politics. It's why you are the Learn Editor at Coindesk, Ollie Leech. You learned us something. And now I think all of us understand what is at stake with infrastructure in regards to the 28 billion they want to raise with that very loose definition.