By Hannah Perez
The U.S. Senate passed the infrastructure bill without amending the controversial crypto provision. What does it mean? Everything you need to know about the legislative plan and what passed in the Senate.
This week, the digital currencies industry was dealt a major blow after the US Senate decided to move forward with the USD $1 trillion infrastructure
without amending a controversial cryptocurrency tax provision
On Sunday, the Senate voted to move forward with the legislative bill without approving any of the amendments submitted by senators to change the cryptocurrency provision. Then on Monday, after two groups of senators submitted a joint effort to amend the provision, the Senate failed to reach a unanimous decision, dropping the initiative.
The original draft of the infrastructure plan – without modifications to the crypto provision – will now move on to the House of Representatives after the Senate voted to pass it on Tuesday.
Bill and its controversial crypto provision
For those not up to date, the U.S. Senate has been discussing for the past week an infrastructure bill seeking USD $1 trillion to fund infrastructure projects, such as transportation and energy systems
The reason why this is relevant to the digital currency ecosystem is that, among the pages of the lengthy bill – which is over 2,500 pages long – the bill includes a provision that envisions imposing stricter rules on investors in the digital currency market with the goal of raising USD $28 billion through taxes on crypto transactions.
To that end, the bill seeks to expand tax reporting requirements on cryptocurrency movements. Specifically, and at the center of the controversy, is the breadth of the term “broker” or “intermediary
“, since, under the current language of the bill, a large number of entities, including miners, wallet developers, node operators and others, would be required to report on cryptocurrency transactions.
The text itself defines a broker as “any person who (for consideration) is responsible for regularly providing any service that effects transfers of digital assets on behalf of another person.”
The problem is that, as currently expressed, this measure would be impossible for many of these actors to comply with. Node brokers, for example, are unable to collect the necessary user information for every cryptocurrency transaction they validate.
ition has been criticized by members of the digital currency community, who claim that, if the bill is passed without amendments, it could be detrimental to the crypto industry, as it would force companies and entities to shut down or migrate out of the country.
In response to the provision, at least two groups of senators filed amendments.
One amendment, introduced by Senators Rob Portman – who introduced the controversial provision – Kyrsten Sinema and Mark Warner exempted only proof-of-work(PoW) network miners from the measure. It was then amended to add validators or proof-of-stake (PoS) miners. This meant that none of these actors would be considered “brokers” and therefore would not be required to file tax reports. President Biden’s administration supported this amendment.
On the other hand, Senators Ron Wyden, Cynthia Lummis – a crypto enthusiast – and Pat Toomey had introduced a rival amendment that ensured that miners, node operators, developers and other crypto industry participants unrelated to providing commercial services would be exempt from the provision. This amendment received the most support from the crypto community.
After the U.S. Senate decided on Sunday to move forward with the bill without voting to pass any of these amendments, the two groups came together on Monday in a joint effort to push through a bipartisan amendment. However, that same Monday afternoon, the joint compromise was rejected after Republican Senator Richard Shelby filed an objection.
The opposition of a single senator was enough to put an end to the issue, as unanimous consensus of lawmakers was needed. As CoinDesk reviewed, Shelby objected because he had tried to attach his own amendment to increase military spending but another senator opposed his motion, which ultimately caused Shelby to oppose the overall compromise on crypto.
Summary of what happened
While we seem to be back to the same starting point – a problematic provision for the digital currency ecosystem – and no amendments, there’s been a lot going on in the U.S. Senate over the past few days. Here’s a recap of the events, followed by an article from CoinDesk:
- July 28: USD $1 trillion infrastructure bill introduced.
- July 29: Last minute introduction of cryptocurrency tax provision that expands the term “broker” for purposesThe term expressly includes decentralized finance platforms (DeFi). The term expressly includes decentralized finance platforms (DeFi).
- August 1: The draft bill is updated to remove “decentralized exchanges” but otherwise retains a fairly broad definition of broker.
- Aug. 4: Wyden, Lummis and Toomey propose amendment exempting entities they conceive of as non-brokers.
- Aug. 5: Portman commits to narrowing the scope of the provision. He and Senators Sinema and Warner introduce an amendment exempting PoW miners.
- Aug. 6: Treasury Secretary Janet Yellen pushes for Wyden to withdraw his amendment, according to the Washington Post.
- Aug. 7: Portman-Sinema-Warner update the draft amendment to include proof-of-participation miners.
- Aug. 8: The U.S. Senate votes to move forward with the bill without amending the provision.
- Aug. 9: Toomey, Portman, Sinema, Warner and Lummis find a compromise between the two competing amendments and seek unanimous consent to add it to the bill. One senator objects and the amendment is not adopted. We are back to the initial text that was introduced eight days ago.
In any case, while the bill is widely perceived as problematic for the cryptocurrency industry, the existence of a provision specific to digital currencies in and of itself indicates that U.S. lawmakers have assumed permanence in this space.
As highlighted by columnist for CoinDesk ,Nikhilesh De, one of the positives is that – and there is no doubt about it – the US Senate is no longer ignoring cryptocurrencies. In fact, it seems quite relevant that two bipartisan groups of lawmakers came together to amend the original draft to narrow the broad scope of the term “broker.”
It also seems no small feat that this joint group managed to deliver a proposal that satisfied the legislators involved, the Treasury Department, and members of the cryptocurrency community. It is worth noting in this regard that the Senate chose to vote for the compromise amendment and that Treasury Secretary Yellen expressed her support for the senators’ joint work.
In light of these events, Nikhilesh De does not rule out the possibility that in the future “we will see more support for lobbyists and think tanks, as well as more public outreach from the incredibly online group of cryptocurrency users and advocates.”
What does it mean and what’s next?
The passage of the USD $1 trillion bipartisan infrastructure plan has been repeatedly delayed these past few days following a number of issues, including the cryptocurrency provision.
This Tuesday, the U.S. Senate finally passed the bill with a vote in favor of 69 to 30. The legislative bill is now ready to move to the U.S. House of Representatives. The 10-year infrastructure plan represents a big step for Democrats in their attempt to push President Joe Biden’s broad economic agenda through Congress, according to CNBC.
The House is expected to review the bill no earlier than September, and it could take several months to pass the measure. In any case, for the time being, the battle against the controversial crypto provision may not yet be lost.
Senator Portman has already shared his opinion that he doesn’t think the current language of the bill can be interpreted in such a broad way as to hurt developers, miners and others; although he has admitted that this could give more clarity to the document.
Meanwhile, in the House, at least five representatives have expressed their rejection of that provision and their interest in having the bill’s current language changed. The list of members includes Patrick McHenry, Darren Soto, Ro Khanna, Tom Emmer and Ted Budd, CoinDesk reported.
However, it is unclear how much leeway the House will have to amend the bill.
Article by Hannah Estefania Perez / DiarioBitcoin
Image by Unsplash