Cryptocurrencies came under fire this fall when Congress identified the nascent industry as an opportunity to raise tax revenue. In just a few brief pages and two amendments to the Internal Revenue Code, Congress had what it needed to claim it secured $28 billion in expected tax revenue over the next ten years. But can taxing cryptocurrencies really add $28 billion to the government’s budget?

A spokesperson from the Joint Committee on Taxation (JCT)––the group that makes these estimates––confirmed that the data and methods used are generally kept confidential and not shared with the public. However, it might still be helpful to consider some of the more unique challenges that they may have faced in constructing the estimate––especially as legislators work on crafting amendments to the law.

Taxing What Doesn’t Exist

The most curious part about the cryptocurrency section of the Infrastructure Investment and Jobs Act is the suggestion that it will increase tax revenue while simultaneously setting a de facto ban on some of the legal activities it seeks to tax. To be fair, it is unlikely that the law will eliminate all cryptocurrency activity in the United States. Traditional brokers like Coinbase and Robinhood have most of the necessary information to comply with the law. However, on that note, it’s doubtful that the provision will create new revenue since these brokers already report information to the IRS and provide tax documents to users as part of their existing oversight.

Where the law may stand to gain additional revenue is in its requirement that cryptocurrency miners and software developers report information to the IRS. However, that activity is exactly what the law will likely eliminate because it mandates an impossible standard of reporting.

History has already shown that members of the cryptocurrency industry will not hesitate to vote with their feet. Kraken, Paxful, Bitfinex, BitQuick, BTCGuild, Eobot, Genesis Mining, GoCoin, LocalBitcoins, and Poloniex all left New York in 2015 in response to the state’s overbearing BitLicense. In a blog post at the time, Kraken wrote that the BitLicense “comes at a price that exceeds the market opportunity of servicing New York residents. Therefore, we have no option but to withdraw our service from the state.”

If the Infrastructure Act is left unamended, there is little doubt that much of the industry will be left with no option but to withdraw their services from the nation as a whole. In fact, that is exactly what happened earlier this year when the Chinese government cracked down on cryptocurrencies. The Chinese government declared both cryptocurrency transactions and cryptocurrency mining illegal. In the months that followed, “fourteen of the biggest crypto mining companies in the world [moved] more than 2 million machines out of China,” according to the Financial Times (See Figure 1 below for where some of those machines were sent).