The forthcoming Senate draft of Biden's infrastructure billa 2,000+ page bill designed to update the United States roads, highways, and digital infrastructurecontains a poorly crafted provision that could create new surveillance requirements for many within the blockchain ecosystem. This could include developers and others who do not control digital assets on behalf of users.

While the language is still evolving, the proposal would seek to expand the definition of broker under section 6045(c)(1) of the Internal Revenue Code of 1986 to include anyone who is responsible for and regularly providing any service effectuating transfers of digital assets on behalf of another person. These newly defined brokers would be required to comply with IRS reporting requirements for brokers, including filing form 1099s with the IRS. That means they would have to collect user data, including users names and addresses.

The broad, confusing language leaves open a door for almost any entity within the cryptocurrency ecosystem to be considered a brokerincluding software developers and cryptocurrency startupsthat arent custodying or controlling assets on behalf of their users. It could even potentially implicate miners, those who confirm and verify blockchain transactions. The mandate to collect names, addresses, and transactions of customers means almost every company even tangentially related to cryptocurrency may suddenly be forced to surveil their users.

How this would work in practice is still very much an open question. Indeed, perhaps this extremely broad interpretation was not even the intent of the drafters of this language. But given the rapid timeline for the bills likely passage, those answers may not be resolved before it hits the Senate floor for a vote.

Some may wonder why an infrastructure bill primarily focused on topics like highways is even attempting to address as complex and evolving a topic as digital privacy and cryptocurrency. This provision is actually buried in the section of the bill relevant to covering the costs of the other proposals. In general, bills that seek to offer new government services must explain how the government will pay for those services. This can be done through increasing taxes or by somehow improving tax compliance. The cryptocurrency provision in this bill is attempting to do the latter. The argument is that by engaging in more rigorous surveillance of the cryptocurrency community, the Biden administration will see more tax revenue flow in from this community without actually increasing taxes, and thus be able to cover $28 billion of its $2 trillion infrastructure plan. Basically, its presuming that huge swaths of cryptocurrency users are engaged in mass tax avoidance, without providing any evidence of that.

Make no mistake: there is a clear and substantial harm in ratcheting up financial surveillance and forcing more actors within the blockchain ecosystem to gather data on users. Including this provision in the infrastructure bill will:

Furthermore, it is impossible for miners and developers to comply with these reporting requirements; these parties have no way to gather that type of information.

The bill could also create uncertainty about the ability to conduct cryptocurrency transactions directly with others, via open source code (e.g. smart contracts and decentralized exchanges), while remaining anonymous. The ability to transact directly with others anonymously is fundamental to civil liberties, as financial records provide an intimate window into a person's life.

This poor drafting appears to be yet another example of lawmakers failing to understand the underlying technology used by cryptocurrencies. EFF has long advocated for Congress to protect consumers by focusing on malicious actors engaged in fraudulent practices within the cryptocurrency space. However, overbroad and technologically disconnected cryptocurrency regulation could do more harm than good. Blockchain projects should serve the interests and needs of users, and we hope to see a diverse and competitive ecosystem where values such as individual privacy, censorship-resistance, and interoperability are designed into blockchain projects from the ground up. Smart cryptocurrency regulation will foster this innovation and uphold consumer privacy, not surveil users while failing to do anything meaningful to combat fraud.

EFF has a few key concepts weve urged Congress to adopt when developing cryptocurrency regulation, specifically that any regulation:

The poorly drafted provision in Bidens infrastructure bill fails our criteria across the board.

The Senate should act swiftly to modify or remove this dangerous provision. Getting cryptocurrency regulation right means ensuring an opportunity for public engagement and nuanceand the breakneck timeline of the infrastructure bill leaves no chance for either.

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The Cryptocurrency Surveillance Provision Buried in the Infrastructure Bill is a Disaster for Digital Privacy - EFF

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More from Fed's Kashkari - says cryptocurrency market is akin to the "wild west", is "full of nonsense" - ForexLive

Still, she said, there are plenty of resources, like the Giving Block, that allow people to donate cryptocurrency and nonprofits to receive it safely and relatively easily.

Donor-advised funds, which allow people to make donations today for tax purposes and recommend charitable grants at a later date, have seen an increase in cryptocurrency donations. Among them are Fidelity Charitable, the largest donor-advised fund in the United States, with over $35 billion in assets, and its main competitor, Schwab Charitable, with over $17 billion.

So far this year, Fidelity Charitable has received $150 million in cryptocurrency, up from $28 million for all of 2020 and $13 million in 2019, said a spokesman, Stephen Austin. The appreciated value of cryptocurrency is prompting more donors to use this asset to fund their charitable giving as well as increasing the average size of each contribution, he said.

What neither Fidelity Charitable nor Schwab Charitable does is manage the cryptocurrency, meaning that they sell it and put marketable securities or cash into the clients donor-advised fund.

Generally, charities are conservative with how they want to manage assets, said Todd Eckler, executive director of Fiduciary Trust Charitable, a donor-advised fund that has about $250 million in assets and does not have cryptocurrency abilities. You could see the value evaporate pretty quickly. Its highly volatile, and its not a good fit for many charitable institutions.

For Mr. Zeller, who helped broker the Bitcoin donation at Penn, the ability to accept cryptocurrency is what matters most.

Its very nice to have the capacity to do it when a donor says, I have some Bitcoin, he said. We can accept it now without it grinding the university to a halt.

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Nonprofits Get a New Type of Donation: Cryptocurrency - The New York Times

Randy Hutchinson| Columnist

You can hardly pick up the financial section of the newspaper or visit a financial website without seeing a headline about Bitcoin or another cryptocurrency.

As I write this column, these articles are on one website:

Hear more Tennessee Voices: Get the weekly opinion newsletter for insightful and thought provoking columns.

The FTC says theres a Wild West vibe to the crypto culture, and an element of mystery too. Investopedia says some people compare cryptocurrencies to the fad for Beanie Babies in the 1980s. It says others draw analogies to Tulipmania, a 17th century speculative bubble in which the average price of a single tulip exceeded the annual income of a skilled worker.

Crooks exploit the headlines to make their scams more believable. According to a new FTC report titled Cryptocurrency buzz drives investment scam losses, nearly 7,000 people reported losses of more than $80 million to the FTC in cryptocurrency scams from October 2020 to May 2021. That was about 12 times the number of reports and almost 1,000% more in losses compared to the same time period a year earlier. Only a small percentage of scam victims report their experience, so the actual numbers are much higher.

Some victims were lured to bogus websites offering the opportunity to invest in cryptocurrencies or in mining them. The websites used fake testimonials and cryptocurrency jargon to appear legitimate. Some even made it seem like the persons investment was growing, but when they tried to withdraw their money, they couldnt.

In giveaway scams supposedly sponsored by celebrities, people sent in cryptocurrency based on the promise that the celebrity would multiply it. Elon Musk, the CEO of Tesla, has been tweeting about Bitcoin and other cryptocurrencies a lot lately, causing their values to go up or down depending on whether his comments were favorable or unfavorable. People reported losing over $2 million to crooks impersonating Musk.

Romance scams in which crooks establish a relationship with a victim online and then request money for some reason have taken on a cryptocurrency twist. Many people reported to the FTC that their new love started chatting about a hot cryptocurrency investment opportunity in which the victim ended up being defrauded.

The FTC report found that people ages 20 to 49 were five times more likely than older age groups to report losing money in a cryptocurrency scam; those in their 20s and 30s were the most vulnerable. But when people older than 50 lost money, the median loss was much higher$3,250 vs. $1,900 for all victims.

The FTC and BBB offer these tips to avoid becoming the victim of a cryptocurrency investment scam:

Scams of all kinds in which victims are instructed to pay using Bitcoin are also on the rise. If youre asked to pay using Bitcoin to claim a prize, pay back taxes, get a government grant, or for any other strange reason, its a scam.

Randy Hutchinson is the president of the Better Business Bureau of the Mid-South. Reach the BBB at 800-222-8754.

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Cryptocurrency investment scams are on the rise. Here's how to avoid them. | Opinion - Commercial Appeal

When the Nigerian government suddenly banned access to foreign exchange for textile import companies in March 2019, Moses Awa* felt stuck. His business importing woven shoes from Guangzhou, China, to sell in the northern city of Kano and his home state of Abia, further south had been suffering along with the countrys economy. The ban threatened to tip it over the edge. It was a serious crisis: I had to act fast, Awa says.

He turned to his younger brother, Osy, who had begun trading bitcoins. He was just accumulating, accumulating crypto, saying that at some point years down the line it could be a great investment. When the forex ban happened, he showed me how much I needed it, too. I could pay my suppliers in bitcoins if they accepted and they did.

According to bitcoin trading platform Paxful, Nigeria is now second only to the US for bitcoin trading. The dollar volume of crypto received by users in Nigeria in May was $2.4bn, up from $684m last December, according to blockchain research firm Chainalysis. And the true scale of crypto flows through Africas largest economy is likely to be much larger, with many trades untraceable by analysts.

An array of factors, from political repression to currency controls and rampant inflation, have fuelled the stunning rise of cryptocurrencies in Nigeria. In February, the government took fright and banned cryptocurrency transactions through licensed banks. In late July, it announced a pilot scheme for a new government-controlled digital currency hoping to reduce incentives for those wanting to use unregulated crypto.

But these measures have done little to dampen trading, with exchanges reporting a continued rise in transactions this year.

Nigerias experience holds lessons for governments around the world, many of which are now thinking hard about how to regulate digital currencies. Britains chancellor, Rishi Sunak, is looking at creating a central-bank-controlled version, already being called Britcoin. EU regulators have set out plans to make digital currencies more traceable, in order to combat money laundering. In rural China, rows of computers used to create bitcoin in a computational process known as mining are being switched off after a clampdown by the authorities. The ruling party imposed a ban on transactions in May.

Elsewhere, Egypt, Turkey and Ghana have sought to clamp down on crypto trading, wary of potentially vast movements of digital funds beyond their regulatory controls.

Nigeria has one of the youngest populations in the world and is ripe for digital finance. With many people looking for ways to escape widespread poverty, pyramid schemes are proliferating.

Trading in foreign currencies is an everyday activity for many. Remittances into Nigeria from those working abroad, which were worth more than $17bn in 2020, have played a role, as has the way digital currencies can provide insurance against exchange rate fluctuations. The value of the Nigerian naira has plummeted almost 30% against the dollar in the past five years.

There are political factors too. Some see cryptocurrencies as vital protection from government repression.

Last October, Nigeria was rocked by the largest protests in decades, as many thousands marched against police brutality, and the infamous Sars police unit. The EndSars protests saw abuses by security forces, who beat demonstrators, and used water cannon and teargas on them. More than 50 protesters were killed, at least 12 of them shot dead at the Lekki tollgate in Lagos on 20 October

The clampdown was financial too. Civil society organisations, protest groups and individuals in favour of the demonstrations who were raising funds to free protesters or supply demonstrators with first aid and food had their bank accounts suddenly suspended.

Feminist Coalition, a collective of 13 young women founded during the demonstrations, came to national attention as they raised funds for protest groups and supported demonstration efforts. When the womens accounts were also suspended, the group began taking bitcoin donations, eventually raising $150,000 for its fighting fund through cryptocurrency.

Jack Dorsey, the founder of Twitter and a prominent advocate of cryptocurrencies, reshared the FemCo bitcoin donation page, further drawing the ire of Nigerias government, which last month suspended Twitter in Nigeria.

The sight of young people openly critical of government figures easily manoeuvring around restrictions shocked the countrys political class, according to Adewunmi Emoruwa, founder of Gatefield, a public policy organisation which gave grants to journalists covering the protests.

I think that EndSars is like the key catalyst for some of these decisions the government is making, he said. It caused fear. They saw, for example, that people could decide to bypass government structures and institutions to mobilise. It sent shockwaves and those shockwaves have continued.

During the protests, Gatefields bank accounts were suspended, until a court found the suspension unmerited and ordered that they be reopened earlier this year.

The episode reinforced the need many Nigerians felt to insure themselves against sudden moves by the authorities. Many organisations now keep some of their finances in cryptocurrencies.

Speaking anonymously to avoid reprisals from the authorities, a leading figure in one civil society organisation, whose accounts were also briefly suspended last October, said digital currencies were now a key insurance against hostile interventions.

We keep some securities in crypto not too much but enough, sort of as an insurance policy, they said. When the ban happened we were, thankfully, able to pay salaries. This way, in a situation like that, well have a way to keep paying our staff.

In February, the Central Bank of Nigeria responded by telling banks to close the accounts of all customers using cryptocurrencies. Financial institutions would have to identify persons and/or entities making transactions in crypto or face sanctions.

The ban was at first a blow to an emerging industry of cryptocurrency brokers who relied on commercial banks to facilitate transactions between sellers and buyers. However, many customers found workarounds, said Marius Reitz, Africa general manager at Luno, a cryptocurrency trading platform.

A lot of trading activity has now been pushed underground, which means many Nigerians are now depending on less secure, less transparent over-the-counter channels, as well as Telegram and WhatsApp groups, where people trade directly with each other, Reitz said. The ban has made cryptocurrency trading harder to monitor and less safe. This also means regulators now have a reduced level of visibility and control of the market, and unfortunately this can expose consumers to a higher risk of being defrauded.

Platforms have also adjusted, by continuing to facilitate transactions as long as the currency being traded is not declared as a cryptocurrency.

While some platforms experienced a hit in trades, for others, the clampdown has increased demand for cryptocurrencies, not dampened it. In the first five months of 2021, according to Helsinki-based platform LocalBitcoins, Nigerians traded 50% more than in the same period last year.

The Nigerian governments response to cryptocurrencies has in fact been inconsistent. Announcing the February curbs, the governor of the central bank, Godwin Emefiele, told a senate committee that cryptocurrency was not legitimate money.

At the same time, Vice-President Yemi Osinbajo publicly rebuked the move. Rather than adopt a policy that prohibits cryptocurrency operations in the Nigerian banking sector, we must act with knowledge and not fear, he said, calling for a robust regulatory regime that is thoughtful and knowledge-based.

Another Nigerian government agency, the Securities and Exchange Commission, has been more open to creating a more regulated environment for cryptocurrency transactions.

The reality that cryptocurrencies cannot effectively be stopped had gradually dawned on the government, said the operator of one Nigerian crypto trading platform, speaking anonymously after having been targeted by the authorities. They know they cant really stop it. Its out of their control, and what scares them is they are not used to being in this position.

* Not his real surname

Bitcoin was the first cryptocurrency, created in 2009, and remains the most widely known and valuable. Its a digital or virtual asset, operating outside of the traditional banking system, and its influence has soared, with a growing number of companies now accepting it for payments.

Each bitcoin is essentially a digital token containing a secret key that proves to anyone in the network who it belongs to. Effectively, each bitcoin is a collective agreement of every other computer on the bitcoin network that the token is real, created by a bitcoin miner, and then acquired through a series of legitimate transactions.

Each time bitcoins are spent, it becomes known to the entire network that their ownership has been transferred. Every transaction is stored in a lasting public record called a blockchain, which underpins the entire system, making it possible to trace a coins history and preventing people from spending coins they do not own.

For bitcoins many advocates, there are several advantages to the virtual system from the way the blockchain can be used to track things other than simple money, to support for smart contracts, which execute automatically when certain conditions are met.

But bitcoins biggest advantage is that it is decentralised and so extremely resistant to censorship or regulatory control by a single entity. Its possible to observe a bitcoin payment in process, but no one can stop it. This has made governments wary: in a conventional financial system, banks can freeze accounts, vet payments for money laundering or enforce regulations.

Thanks to the decentralised nature of cryptocurrency networks, people have been able to make international payments from closed or tightly restricted economies, but this has also made them a haven for illegal activities, from cybercrime to money laundering and drug trading.

Another concern about bitcoins is that they damage the environment. Bitcoin mining the process in which a bitcoin is awarded to a computer that solves a complex series of algorithms consumes vast amounts of energy. Miners set up large computer rigs to maximise the chances of being awarded bitcoins. The carbon footprint of this mining is now similar to Chiles, according to the Cambridge Bitcoin Electricity Consumption Index, a tool from Cambridge University that measures the currencys energy usage.

Advocates of bitcoin say the mining is increasingly being done with electricity from renewable sources. And while the amount of energy consumed by bitcoin has dropped significantly this year, concerns remain. Environmentalists argue that miners tend to set up wherever electricity is cheapest, which may be in places with coal-generated power.

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Out of control and rising: why bitcoin has Nigerias government in a panic - The Guardian