[Press Time Update: In this fast changing story, TJ can report that the U.S. Senate turned down a crypto-tax amendment to a $1 trillion infrastructure package. The proposed amendment had been offered at the last minute by legislators arguing over which crypto brokers should be subject to new tax reporting requirements.
Late Monday, the compromise proposal, which required unanimous approval to be included, was sunk by Sen. Richard Shelby (R-AL). Shelby had tried to attach his own unrelated amendment calling for a $50 billion boost in military expenditure, which had been rejected.
Senators Mark Warner of Virginia, Kyrsten Sinema of Arizona, Rob Portman of Ohio, and Cynthia Lummis of Wyoming co-sponsored the crypto amendment, which was offered by Senator Pat Toomey of Pennsylvania.]
Fight for the Future, a digital rights advocacy organization, said over the weekend that it will oppose an amendment proposed by Senators Mark Warner, Rob Portman, and Kyrsten Sinema to clarify the wording used in the bipartisan infrastructure bill regarding cryptocurrency.
According to the group, both the original provision in the bill, and the revision, are deeply flawed and would visit havoc on one of the few economic bright spots of the past 24 months.
“The original provision and the Portman-Warner amendment fundamentally misunderstand that decentralized technology is decentralized,” Fight for the Future said in a statement. “The law as-written is completely unworkable, requiring many in this ecosystem to produce data that they never have and cannot get access to—by the very nature of the technology.”
Both the Biden administration and Democratic supporters of the amendment, according to the organization, “have not done their research on decentralized technology.”
Sheila Warren, head of the World Economic Forum’s blockchain and digital assets counsel, was among those siding with Fight for the Future’s assessment. She said the amendment’s negative treatment and misguided dictates would hurt innovation and progress:
“Bewildering is an understatement for what is unfolding in the U.S. Senate around the crypto-related provisions of the infrastructure bill. It was remarkable to see language endorsed that was not neutral about technology. This has massive implications for a relatively nascent industry.”
The amendment has nominal bi-partisan support, with several moderate Republicans joining Democrats. Senators Ron Wyden, Cynthia Lummis, and Pat Toomey introduced the amendment to the Senate’s existing infrastructure bill, HR 3684, on Wednesday. Senator Rob Portman, a lead Republican engaged in the bill, as well as 114 signatories from the crypto and blockchain sector, including Twitter CEO Jack Dorsey, have endorsed the idea.
Senators offered the amendment because the original bill proposes stricter regulations for companies dealing with cryptocurrencies and expanded reporting requirements for brokers, including requiring that digital asset transactions worth more than $10,000 be disclosed to the Internal Revenue Service, or IRS.
It would also require sweeping tax reporting for digital transactions, and virtually anyone involved in any aspect of crypto mining or crypto development. That includes having anything to do with mining software or hardware, “validating distributed ledger transactions,”, or “developing digital assets or their corresponding protocols.”
The amendment proposed by Wyden, Lummis and Toomey revises the bill’s definition of a broker and could allow many players in the crypto space to avoid the additional reporting requirements.
But a “modified” amendment put forth by Warner, Portman and Sinema the following day proposed excluding proof-of-mining and sellers of hardware and software wallets from the bill, while suggesting crypto developers and proof-of-stake validators would still be subject to expanded reporting.
Critics say this modification would essentially allow the U.S. government to pick and choose which technology is acceptable in the crypto space.
TRENDPOST: The multi-trillion dollar infrastructure bill has been projected to pile on budget deficits and reams of new regulations. The Congressional Budget Office projected on Thursday that the infrastructure plan would add $256 billion to the deficit over the next decade.
But jamming poorly conceived crypto regulations into the measure to try to raise revenues for the bill will only compound the mess.
The U.S. has seen an uptick in crypto projects and mining as a result of China’s clampdown. Meanwhile, blockchain innovations in Defi (decentralized finance) and other spheres are exploding, creating new efficiencies and broadening access and fairness for participants.
The general level of crypto investment participation has doubled in the space of four months. Clearly, average people want in on crypto innovations. The area has been a bright spot in an otherwise bleak economic period of lockdowns, inflationary stimulus, productivity and supply chain disruptions, and employment and housing nightmares.
If the U.S. joins China in trying to supplant or co-opt blockchains, they may succeed in stifling innovations, and imposing centralized, controlled alternatives. But it would be a pyrrhic victory, with ramifications going beyond economics. It would add another ton of bricks in the wall of a new 21st century feudal serfdom.