Why Not Reporting Info on Your Crypto Trading Partner Could Become a Felony

This summer, the crypto community was up in arms about a provision inside the infrastructure bill with which many entities covered by its vague definition would have found it impossible to comply.

And yet there’s another provision that would also be not only difficult for many individuals who transact in crypto to comply with, but also could have negative consequences for privacy and security. The requirements of this provision could also have a chilling effect on peer-to-peer crypto transactions not just of a purely financial nature, but even those involving NFTs.

Called 6050I for the part of the tax code it references, this amendment would require anyone who receives more than $10,000 in digital assets must verify the sender’s personal information, including name, birthdate, Social Security Number, and occupation, report it all to the IRS within 15 days — and keep it for five years. (The form takes 21 minutes to fill out.) On top of that, violations of 6050I are felonies, the penalties for which can be up to five years in prison and a $25,000 fine.

“This is designed to discourage peer-to-peer transactions and transfers of digital assets,” said Abraham Sutherland, an advisor to the Proof of Stake Alliance and adjunct professor at the University of Virginia Law School, on the latest episode of my podcast, Unchained.