Support a Critical Amendment To Save Crypto From Infrastructure Bill
What's going on?
Congress is ready to pass a $1 trillion infrastructure bill with a section that will extract $28 billion in taxes from players in cryptocurrency industry. The reporting requirements have faced intensive criticism for its definition of the taxable parties, "brokers," which is excessively broad and would result in unfair taxation of parties, like miners and software developers, increased financial surveillance, and stunted innovation in the industry.
What you can do:
Head to Fight for the Future to be connected with the Senate by phone. Express your support for the amendment put forth by three U.S. Senators, Senator Wyden, Toomey, and Lummis that will create exemptions for open source software developers or validators like miners or stakers.
Infrastructure Bill Targets Crypto, Highlighting Poor Congressional Judgment
Congress is set to pass a $1 trillion infrastructure bill with a section that's poised to generate aggressive new IRS reporting requirements for digital assets. The section has faced widespread criticism for including language that would indiscriminately impose taxes on discrete professionals throughout the cryptocurrency industry and stifle innovation.
The bill defines a broker as “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.”
This definition ignores distinctions between drastically dissimilar actors in the industry, and would nearly ensure that non-financial service parties like bitcoin miners–network operators that approve bitcoin transactions on the blockchain –would be unfairly taxed. Under the bill’s definition, miners could easily be conflated with cryptocurrency exchanges like Coinbase. This would not only impose unreasonable taxes on miners, but create a precedent for conflation of industry actors in future policy and legislation.
Three Senators, Senators Pat Toomey, Ron Wyden, and Cynthia Lumis have come out in opposition to the bill’s broker reporting requirements in recent days, proposing an amendment that would exempt miners, developers and node operators. The senators have criticized the bill’s clauses as excessively broad, and thereby bound to create rampant problems in the industry.
The definition is indicative of a broader issue that persists not only in the bill, but on the Hill: a prevailing indifference to, or ignorance of the nuances of the cryptocurrency industry. The complex and unique nature of the industry makes it such that a governing body that isn’t knowledgeable about cryptocurrency should be disqualified to make decisions about the industry. The cryptocurrency industry is markedly different from the traditional business sector in critical ways and therefore must be treated as such. As in the case of this bill, the result of uninformed policy-making is a dire waste of time and money.
Lumping together miners, software developers, and other parties associated with cryptocurrency generation into one “broker” category is reminiscent of Senator Elizabeth Warren’s recent condemnation of “shadowy, faceless super-coders” in the crypto industry. While far from “faceless”, crypto industry professionals are seemingly made so by the oversimplifying language of the bill.
Congress’ present failure to properly characterize cryptocurrency industry professionals is undoubtedly related to the antagonistic relationship between the central government and cryptocurrency. In principle, cryptocurrency strikes a direct blow at government-controlled money. Whether the bill’s myopic definition of crypto “brokers” and the draconian requirements are part of a deliberate attempt to cripple the industry or mere naivete on Congress’ part , the fact that bitcoin was built as a solution to the failures of government-controlled money is at least partially responsible for the enmity towards crypto baked into the bill’s requirements.
Ultimately, all this begs the question: can Congress persist in regulating the cryptocurrency industry without understanding it?
Clearly, for the Senate to pass a bill that seeks to tax crypto operators, they ought to have some knowledge on how digital assets work. For example, Sen. Rob Portman (R-OH), who served as the US Trade Representative under the Bush administration, was responsible for the crypto provision in this bill. However, Senator Portman has little to no exposure to the crypto sector, which is markedly different from traditional business and requires specialized knowledge to handle on a regulatory level.
Given the specific nature of cryptocurrency and its increasingly significant role in business and society, policy-makers cannot profess the kind of expertise needed to make high-level decisions about an entire industry without possessing a basic sophistication towards cryptocurrency and its underpinnings.
The future of cryptocurrency regulation will depend on whether outliers like Senators Toomey, Wyden, and Lumis can succeed in combating rampant misinformation in government. Congress can only move forward with crypto regulation if the authoritative parties are informed, open to learning, and resist to negative bias. The burden will ultimately rest on the crypto industry to teach Washington about the potential benefits of crypto. We can only hope Washington is ready to listen.