>"Say you take your money put it in a bank account, the bank lends that money out again. Are you responsible for knowing the recipient? No. I imagine the same will be extended to putting money into a swap pool or DEX."
My read of this law is that the bank or recipient of your money would be required to make the report (as they are the 'possessor'), which appears to already be the case (so-called KYC laws). I think you may be underestimating the amount of regulatory compliance that the government requires of many businesses.
Exactly, the banks don't report that YOU paid money to others on a loan, the bank has it's own reporting requirements, hence you are not liable. Interestingly, financial institutions (which includes exchanges) are currently exempt from the reporting requirements in this law "the only businesses that are exempt from section 6050I are banks and financial institutions."
So my take is they haven't figured out how to regulate the institutional aspect, they're simply attempting to monitor person to person transfers as a first pass. And this makes sense given the wash sales and other tricks people are trying to pull via NFTs and the like.
My read of this law is that the bank or recipient of your money would be required to make the report (as they are the 'possessor'), which appears to already be the case (so-called KYC laws). I think you may be underestimating the amount of regulatory compliance that the government requires of many businesses.