Per my understanding, the main consequence of bill for crypto is that it imposes a tax requirement on proof-of-stake validators, protocol devs etc, to report taxes on people who transact with the technology (much like how stockbrokers have to report taxes for the clients).
Your interpretation of the bill is incorrect.
The bill would redefine the word "broker" to include the following:
(D) any person who (for consideration) is
responsible for regularly providing any service
effectuating transfers of digital assets on behalf
of another person.
It defines "digital assets" in a way that includes cryptocurrencies, NFTs, "or any similar technology as specified by the Secretary [of the Treasury]." These two definitions are critical, because the reporting requirements only attach when both definitions are satisfied (or under one of the existing definitions, of course).
So, does this include protocol developers? Probably not. They are not "regularly" providing anyone with any sort of "service," they just write code and put it on the internet. Other people would have to actually run the code to accomplish anything.
What about miners and validators? It's a bit unclear to me. The word "regularly" could be interpreted as meaning that this "another person" has to be a regular client of the broker - i.e. that you're only a "broker" if you have an ongoing business relationship with the person on whose behalf you are transmitting the funds. Under this interpretation, miners and validators are not "brokers" and do not have any reporting requirements. But it could also be interpreted merely as saying that the broker has to provide this service on a regular basis, regardless of whether there is any ongoing relationship between broker and client. In this interpretation, miners and validators probably do qualify as brokers. I am not sure which of these interpretations is correct. However, if you don't accept transaction fees, then you're not doing it "for consideration," and so the requirement probably does not apply in that case (but I don't know what to make of the mining reward - that might also count as "consideration").
Given the wording of other parts of the law, and particularly the fact that another part of the bill would introduce language referring to "an account maintained by such broker," I think the first interpretation makes more logical sense than the second, and therefore it is probably not intended to include miners and validators (who generally do not maintain "accounts" on behalf of other people).
Regardless of how you interpret this definition, however, it definitely includes cryptocurrency exchanges, which do have regular, ongoing relationships with their users, and typically do accept some sort of payment in exchange for their services. So the primary effect of this is to impose reporting requirements on cryptocurrency exchanges.
What I don't understand is, crypto investors/traders have to pay taxes anyway. So how is this tax provision meant to generate (extra?) revenue for the bill?
You are correct in that the bill does not create any new taxes. However, if a transaction goes unreported, it is much easier for the trader to evade or falsify their taxes with respect to that transaction. By making it easier to enforce those taxes, the bill is intended to increase the total amount of taxes paid, either through audits or as a result of traders not trying to evade taxes in the first place.
We might also expect that the bill will decrease the total volume of cryptocurrency trading, because people will no longer see it as a means of evading taxes. As a result, the total amount of taxes owed could decrease, even as the total amount collected increases. Or, if we're cynical, it might cause the crypto bubble to pop altogether, and then the IRS gets nothing. Accurately predicting the revenue impact of a bill is a difficult problem to solve. Nevertheless, the argument that the bill will raise revenue is reasonable, because it would make tax evasion more difficult overall, regardless of what happens to the price and volume of cryptocurrencies.
