Written by Norman Isaac Mwambazi

Explaining the impact of the infrastructure bill on cryptocurrency

On Tuesday, August 10, 2021, the U.S. Senate passed the proposed infrastructure bill that allows the federal government to spend …

On Tuesday, August 10, 2021, the U.S. Senate passed the proposed infrastructure bill that allows the federal government to spend over a trillion dollars on the country’s infrastructure projects like water systems, roads, bridges, and rail among others. The bill, although thought to take a little bit longer to be signed into law by President Joe Biden, received 7soupport from the minority House Republicans, with the results of the vote reading 69-to-30. 

The passing of the bill affected the performance of the Dow Jones Industrial Average and the S&P 500 which all rose in extended trading Tuesday and premarket trading session Wednesday closing at near all-time highs.

Infrastructure funds like the Global X U.S. Infrastructure Development ETF PAVE, iShares U.S. Infrastructure ETF (IFRA), and the Industrial Select Sector SPDR ETF (XLI) also rose in the same period in anticipation of an extra trillion dollars to be spent on infrastructure and materials, although analysts said that this anticipated spending has already been priced into the markets.

With the passing of the infrastructure bill already having an impact on the infrastructure stocks, one wonders what impact it is going to have on the budding cryptocurrency market. In recent few days, bitcoin and other peer coins have seen visible growth, with bitcoin coming from the lows of below $30,000 last month to closing yesterday at a little bit above $46,000. Unlike infrastructure stocks, the passing of the infrastructure bill did not excite the crypto market that much, and CoinDesk Learn Editor Ollie Leech explained why in a video call to Yahoo Finance.

To start, Leech started by commenting on the Tuesday hacking of PolyNetwork, a decentralized finance platform where hackers made off with a whopping $613 million. This is the biggest ever cryptocurrency heist. However, after the serious collaboration of several crypto firms, more than a third of this money ($260 million) has been returned. At least all is not lost.

Crypto firms like SlowMist, a blockchain-based security team worked with other industry players like crypto exchange company Binance, among others and the digital identity of the hackers like a mailbox, IP address, fingerprints were uncovered. Other cryptocurrency exchanges said that they were going to blacklist the hackers’ crypto addresses to cut off their escape routes and make sure they don’t benefit from the hack. It has been since reported that the hackers said they did this merely for fun.

All these developments didn’t shake the crypto markets at all as would be expected. There was never a dip or a surge in the price of digital coins, and Leech noted that this may be a sign that the markets are growing and are not shaken by every occurrence. Leech’s comments about the cryptocurrency market maturity hold water because we have just seen how Elon Musk’s tweets and statements about cryptocurrency, particularly bitcoin and dogecoin, have driven these coins’ prices down from their all-time highs. Now that the markets seem to have matured, stability could be in sight.

Although the crypto world was not shaken by the infrastructure bill, there are concerns about it, and Leech explained why.

“It is a wild story. As we know, the infrastructure bill passed by the Biden Administration is going to spend a trillion dollars to improve various areas of the United States. And a lot of people are asking where is this trillion dollars going to come from?” Leech said.

He continued, “One area proposed is by improving tax compliance around cryptocurrencies and addressing that issue. And it is something that they reckon can bring in around $28 billion over the next 10 years.”

Leech said that the proposed vague plan to expand the definition of a broker for the Internal Revenue Code of 1986 to include anyone responsible for and regularly providing any service affecting transfers of digital assets is causing the uproar in the crypto space.

Investors in digital assets are concerned because this could easily extend to almost everyone involved in the crypto business. Talk about coin miners, software developers who design and develop apps and platforms where cryptocurrency is traded or stored, crypto startups, hardware manufacturers, and others who don’t custody customer assets. This means that anyone who falls under the new broker definition will have to abide by Internal Revenue Service (IRS) reporting requirements.

Cryptocurrency trading is known for privacy, but this is about to change if the bill is passed without harmonising the broker definition clauses. According to the Electronic Frontier Foundation, the IRS and those involved will have to collect user data like names, addresses, and transactions among other details that give away people’s digital privacy.

A section of U.S. Senators from both the Democratic Party and the Republican party had put together an amendment to change the wording and the scope of the broker to diminish some of the damage it could do. The said senators were Ronald “Ron” Lee Wyden (Dem. Oregon), Cynthia Marie Lummis Wiederspahn (Rep. Wyoming), and Patrick “Pat” Joseph Toomey Jr. (Rep. Pennsylvania).

Unfortunately, their proposed amendment fell through because the White House and Treasury Department were not convinced with the idea of supporting an alternative amendment so the Senate passed the bill without considering either amendment. 

What is PolyNetwork?

PolyNetwork is a lesser-known name in the world of crypto and I am almost sure this is the first time you are hearing about it. Well, the company, which is a Decentralized Finance (DeFi) platform that facilitates peer-to-peer transactions, has come into the limelight after being the subject of a hack that saw it lose $613 million. PolyNetwork focuses on allowing users to transfer or swap cryptocurrency tokens across different blockchains.

No one knows where PolyNetwork is based and those who run it have remained anonymous (not the hacker group), but CoinDesk says that it was launched by the founders of the Chinese blockchain project Neo. PolyNetwork runs on the blockchain technology of Binance, Ethereum, and Polygon.

PolyNetwork works in such a way that crypto tokens are swapped between the blockchains using a smart contract that contains instructions on when to release the assets to the counterparties. This means that a user can transfer bitcoin from the Binance Smart Chain to the Ethereum blockchain and vice versa, using PolyNetwork.