The U.S. infrastructure bill, which would also revise tax collection on digital assets, is currently the target of a last-minute amendment that’s delaying its final vote. The bill faces delays particularly motivated by a last-minute amendment that pits the White House against Senate Finance Committee Chairman Ron Wyden over the best way to require cryptocurrency entities to report transactions to the IRS.
The broader bill aims to reinforce the federal government’s expenditure in America’s infrastructure, with large sums of money (on the order of billions of dollars) being set aside as part of the American Jobs Plan, targeting repairs for already existing roads, ports, bridges, and public transportation infrastructure, while also investing in new infrastructure intended to support both communities and business growth.
The original proposal on stricter tax rules on cryptocurrency transactions was proposed by Democratic Senators Mark Warner and Kyrsten Sinema alongside Republican Senator Rob Portman but faced backlash from cryptocurrency advocates. The crypto advocates argue that the original language in the legislation requiring brokers of digital assets to report on crypto trading gains is vague and too broad and would include validators, hardware and software makers, as well as protocol developers. These groups represent the bread and butter of the cryptocurrency development space, and the group argues the regulations could potentially stifle innovation.
A proposed amendment that narrows the scope and explicitly excludes these cryptocurrency parties was advanced by another bipartisan group of senators (Democratic Senator Ron Wyden and Republicans Pat Toomey and Cynthia Lummis). The two groups are now attempting to reach a consensus amendment that would be added to the original bill before it passes the Senate floor. However, if they don’t reach a timely agreement, the original draft will be carried through – and with it, the fiscal policies that crypto proponents don’t agree with.
Blockchain Association executive director Kristin Smith warned that “At the eleventh hour, Sen. Warner has filed an amendment that is anti-technology and anti-innovation – and would be disastrous for the U.S. crypto ecosystem,” he wrote. “Removing protections for software developers – what Senator Warner’s amendment aims to do and that is defined in the Wyden-Lummis-Toomey amendment – is a negative catalyst that will force crypto development and innovation out of the U.S. to friendlier, pro-technology jurisdictions,” continued Smith.
However, President Joe Biden via the White House on Thursday announced a public siding with the original bill, with deputy press secretary Andrew Bates stating that “The Administration is pleased with the progress that has yielded a compromise sponsored by Senators Warner, Portman, and Sinema to advance the bipartisan infrastructure package and clarify the measure to reduce tax evasion in the cryptocurrency market.” Mr. Bates further added that “The Administration believes this provision will strengthen tax compliance in this emerging area of finance and ensure that high income taxpayers are contributing what they owe under the law.”
The cryptocurrency space has been left to grow relatively unchecked for more than a decade now, and policymakers know there is a world of untapped tax potential in what is being hailed as one of the most significant new technologies in development. Moreover, blockchain technology (and cryptocurrencies in general) can become one of the most fundamental technologies in several areas of human activity, whether it be finance, upholding democratic elections, or any number of other areas.
Such a large latitude in impact for a single technology means that regulatory action has to be considered extremely carefully, as a stranglehold on innovation might push the United States behind in a race that most consider crucial on the global stage. With China exploring ways to deploy a state-based digital cryptocurrency, and the European Central Bank’s recent announcement on efforts to develop and implement a digital euro, speed is of the essence when it comes to digital asset tax revenues accelerating the American economy while keeping the country a friendly space for leading developers of the technology. It remains to be seen if the senators reach an agreement, and even if they do reach one, whether it’s timely enough to include the amendments in the original bill.