Posted 2 months ago | by Catoshi Nakamoto
Numerous U.S. lawmakers including — Sen. Ron Wyden (D-OR), Rep. Warren Davidson (R-OH), Rep. Ted Budd (R-NC), and Rep. Pat Toomey (R-PA) — have all voiced concerns against the cryptocurrency tax provision in the $1 trillion infrastructure bill which in its current form could kill the crypto industry. While the bill was slightly improved from the proposed draft, the text still is seen as being “unworkable,” according to Senator Pat Toomey, who said, “I plan to offer an amendment to fix it.”
The U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a statement by Ranking Member Pat Toomey on the legislation.
“Congress should not rush forward with this hastily-designed tax reporting regime for cryptocurrency, especially without a full understanding of the consequences. By including an overly broad definition of broker, the current provision sweeps in non-financial intermediaries like miners, network validators, and other service providers.”
Toomey added: “Moreover, these individuals never take control of a consumer’s assets and don’t even have the personal-identifying information needed to file a 1099 with the IRS. Simply put, the text is unworkable. I plan to offer an amendment to fix it.”
The crypto provision in the infrastructure bill has been heavily criticized by several lawyers in the space as Bitboy Crypto reported. The bill’s goal seems to be a push for a more stringent tax standard for crypto businesses to report to the Internal Revenue Service (IRS). The provision is expected to raise $28 billion to help fund the $1 trillion infrastructure plan.
The language or rhetoric used in the infrastructure bill was somewhat revised by policymakers to clarify what defines a broker. However, both Jerry Brito the Executive Director at Washington-based crypto lobbyist Coin Center and Kristin Smith, executive director of the Washington-based trade group Blockchain Association who testified as witnesses in one of three congressional meetings last week commented about the bill.
Jerry Brito, executive director of Coin Center, explained that the changes in the revised bill are “not good enough to clearly exclude miners.” Jake Chervinsky who is appointed as Compound’s legal counsel said much of the same, noting “we’ve made progress, but the language is still unacceptable.”
Sunday night infra bill update:
We've made progress, but the language is still unacceptable. Next, we'll advocate for an amendment on the Senate floor. If that fails, we'll take our fight to the House.
My deepest thanks & respect to everyone working tirelessly to fix this. 🙇♂️ https://t.co/oh95DEMG6z
— Jake Chervinsky (@jchervinsky) August 2, 2021
Smith previously called the U.S. Senate’s deal “hugely problematic.” Bloomberg quoted her stating that the provision could push a lot of American blockchain companies overseas. “We’re pushing every lever right now to change it,” added Smith.
Smith stated that while there have been some improvements made to the legislation compared to the original text there are still concerns, writing in an open letter the following:
“While some minor improvements have been made, the latest language still poses fundamental concerns and questions about certain terms and definitions used in the provision,” Kristin Smith, executive director of the Blockchain Association, said in an open letter. She added, “As this bill continues to move through the Senate, we urge Senators to clarify that the language doesn’t capture non-custodial entities in the digital asset ecosystem.”
Another senator Ron Wyden who sits as the chairman of the Senate Committee on Finance, and heads the chamber’s tax-writing council, stated he also wants to make changes to the crypto tax provision in the bill. Wyden expressed that “Americans avoiding paying the taxes they owe through cryptocurrency is a real problem that deserves a real solution,” he tweeted.
However, he noted that the “Republican provision in the bipartisan infrastructure framework isn’t close to being that solution. It’s an attempt to apply brick and mortar rules to the internet and fails to understand how the technology works.”
Two Republican lawmakers Rep. Ted Budd and Rep. Warren Davidson also made comments about the rushed provision into the bill expressing that this was “America abandoning the fintech revolution” and that the legislation would “devastate American jobs.”
Budd told Breitbart news that lawmakers should follow other pro-crypto legislators’ examples, such as Sen. Cynthia Lummis (R-WY), to fight for American dominance in the cryptocurrency industry and work to achieve “regulatory clarity” for these companies to prosper.
“It’s only a few percentage points to try to pay for. So, very small, but it’s outsized as far as the industry in a very nascent stage; we have a relatively new less than a decade old crypto industry, and you’re really going to offshore this, if we’re lucky, to the Estonia’s, to the Singapore’s, and if we’re unlucky to places like China. And, so we have to stay strong, as a nation, and we have to stay competitive. And this really reduces our international competitiveness when it comes to crypto.”
Rep. Davidson designated the language used in the bill as “very sloppy,” tweeting: “This is really bad policy making its way through an infrastructure bill. It’s America essentially abandoning the fintech revolution,” in response to a video uploaded discussing the bill. In the video, Davison said that the bill seems to be written by the Treasury Department themselves, expressing that officials don’t understand the technology they are attempting to regulate.
This is really bad policy making its way through an #infrastructure bill.
It's America essentially abandoning the #FinTech revolution.
— Warren Davidson (@WarrenDavidson) July 30, 2021
The bill has passed its first hurdle in the United States Senate, with Senators voting 67-32 to advance the bipartisan infrastructure bill back to the Senate, and then the legislation will head to the House. It must be stressed that the bill will now move into a process to debate and amend the proposal before it goes to the House floor for a final vote, where it will eventually be signed by U.S. President Joe Biden into law or fail to pass. Biden could also choose to veto the bill, although that scenario is unlikely as an overwhelming majority of 50 Democrats voted yes compared to just 17 Republicans who helped seal the vote.
This latest bill echoes many of the same points that U.S. agencies have referenced in the past like making KYC mandatory in the crypto space. The only thing missing is the banning of non-custodial wallets. On the flip side, the U.S. government would be recognizing cryptocurrency and solidifying it as a legitimate industry finally offering some clarity, which would bring in more money from hedge fund investors causing new capital to flood into the crypto space. However, it won’t be the same and there will be restrictions on open source technology which is a large negative prospect for crypto’s future.
You can read the full text of the updated version of the draft legislation here. The new bill redefines the original’s definition of “brokers” in crypto-related transactions – as “only those providing digital asset transfers.”
Bitcoin is currently trading at [FIAT: $38,466.15] DOWN -4.7% in the last 24 hours according to Coingecko at the time of this report.