Heavyweight critics are gunning for a controversial new bill that they claim will see the United States “essentially abandon” the “fintech revolution” if passed into law.
The bipartisan measure, which addresses a range of infrastructure-related measures, could raise up to USD 28bn from crypto investors, as reported last week. The bill got the green light to advance, but met vehement resistance from crypto industry insiders, with one quipping acidly: “They’ve ruined their money so now they’re coming for ours.”
In essence, the bill proposes creating yet more regulations and new information reporting requirements – in the hope of forcing more crypto holders to pay taxes.
The bill, which, incidentally, looks like this…
There it is. The bipartisan infrastructure bill pic.twitter.com/0vypuMIQFw
— Leigh Ann Caldwell (@LACaldwellDC) August 1, 2021
… could gain senate approval “as early as this week,” CNN quoted Susan Collins, a Republican senator involved in co-creating the bill was quoted as saying.
In a fact sheet about the bill’s contents, its architects spoke of “strengthening tax enforcement when it comes to cryptocurrencies.”
However, crypto community members shared an updated version of the draft legislation that redefines the original bill’s definition of “brokers” in crypto-related transactions – so that only those actively providing digital asset transfers would be classified as “brokers.”
On social media platforms, some pointed out that the bill makes no direct mention of decentralized exchange (DEX) platforms, although there is no clear mention of how miners, developers and blockchain node operators would be considered from a tax and legal standpoint.
The legal expert and General Counsel at Compound Labs Jake Chervinsky had written of the previous bill’s incarnation that it sought to “expand the Tax Code’s definition of ‘broker’ to capture nearly everyone in crypto, including non-custodial actors like miners,” “forcing them all” to apply know-your-customer (KYC) protocols to their users. “This is not a drill,” he wrote.
Of the updated bill, he later opined that progress had been made, although “the language is still unacceptable.”
But the head of tax strategy at Coin Tracker, Shehan Chandrasekera, agreed that “mainly exchanges” would be affected (as would their customers) by the updated bill. He warned that, if passed, the law could leave crypto holders “expecting more 1099” forms “around tax time” as regulators “think this will improve tax compliance.”
Jerry Brito, the head of Coin Center, wrote that “we didn’t get the language we wanted in the final bill text” but claimed that “it’s better than where it started. However, he added, it was “still not good enough to clearly exclude miners and similarly situated persons.”
Brito added that all was not lost, remarking that a “committed group” of crypto firms were currently consulting on the bill, and that there “will be an amendment process where changes to the bill can still be made.”
He noted: “We’re working with our friends and allies in the Senate to make that happen.”
Chervinsky, meanwhile, wrote that he and his associates were “advocating for an amendment on the Senate floor,” adding that “if that fails, we’ll take our fight to the House.”
The Castle Island Ventures partner Nic Carter bristled at the suggestion of miners being targetted, writing: “Banning mining in the United States would be an act of legislative stupidity on a par with prohibition. Hopefully, Congress is able to meet a higher standard than the [Chinese Communist Party], but I’m not optimistic.”
Support may be forthcoming from some quarters of Congress, too. The congressman Warren Davidson tweeted: “This is really bad policy making its way through an infrastructure bill. It’s America essentially abandoning the fintech revolution.”
Congressman @WarrenDavidson issues a warning about the new $28B crypto provision in the Infrastructure Bill, and about why it should concern us
— Documenting Bitcoin 📄 (@DocumentingBTC) July 30, 2021
Some other influential politicians came out swinging, too, albeit in a slightly different direction. Ron Wyden, the chairman of the Senate’s Finance Committee, wrote that crypto tax avoidance was “a real problem that deserves a real solution.” But he opined that the new bill “isn’t close to being that solution” as it uses “brick and mortar rules to the internet” and “fails to understand how the technology works.”
The bill is part of the Joe Biden administration’s plan to invest some USD 110bn in “roads, bridges and major infrastructure projects,” CNN reported, with a further USD 39bn earmarked for public transit modernization, USD 65bn going toward boosting broadband internet access and a further USD 73bn to bolster the American power network.