$ 1 trillion infrastructure bill: how two cryptocurrency amendments started a digital rights conversation

Senate deliberations continued over the weekend on a $ 1,000 billion infrastructure bill, with a particular focus on how the bill could impact the crypto world. -cash. The infrastructure bill, known as HR 3684, allocates money to build roads, bridges, transportation systems and support clean energy, among other developments. The bill includes a tax provision that outlines plans to raise approximately $ 28 billion for this $ 1,000 billion package through crypto transaction taxes.

“As we know, cryptocurrency is a digital asset that more and more people are investing in. We should want this to continue and continue in a healthy and sustainable way,” said Senator Rob Portman (R-OH ) during the senatorial session on Sunday. . Portman, along with other senators, proposed an amendment to the tax provision of the cryptocurrency bill to allay concerns about digital rights. However, Portman’s was the second proposed amendment that addressed this concern. The two competing amendments shed light on the concerns of those in the crypto space who are particularly unhappy with a keyword in the tax provision: “broker”.

Cryptocurrency investors unhappy with the new tax provision

The bill identifies a “broker” as any person “responsible for and regularly providing any service performing digital asset transfers on behalf of another person”, and any person so identified would be subject to tax reporting obligations. This appears to include people like “miners,” who use a “proof-of-work” system by solving algorithms with computers and software that, if correct, serve as verification for crypto transactions. Minors do not have clients, so they would not be able to access the information needed to complete a 1099 tax form – which the provision requires brokers to submit. Brokers are also required to submit reports on all transactions over $ 10,000 to the Internal Revenue Service (IRS), which they were already required to do before the bill was proposed.

The nonprofit Electronic Frontier Foundation (EFF) on digital rights believes these requirements are also a matter of confidentiality. “The mandate to collect the names, addresses and transactions of customers means that almost any business, even tangentially linked to cryptocurrency, can suddenly be forced to monitor their users,” the foundation wrote in a statement released last week. .

The decentralized financial system of cryptocurrency and its blockchain transactions do not tie information to an individual, but rather to the series of previous transactions, so cryptocurrency markets do not easily allow the collection and communication of information. on users. Twitter CEO Jack Dorsey weighed in on the current state of crypto talks. “Forcing reporting rules on Americans who develop software and hardware, who operate and secure the network, or who run nodes to build resiliency and efficiency, is an impossible demand that will only spur development and development. ‘exploiting this critical technology outside of the United States,’ Dorsey tweeted.

The tax provision has been pushed back by other digital rights advocates, like the nonprofit Fight for the Future, which has urged its supporters to call on senators and encourage lawmakers to reconsider crypto regulations. “We believe that policies that impact fundamental civil liberties and the rights of people in the digital age should never be added to legislation like an infrastructure bill,” Evan Greer told CNN , director of Fight for the Future. Further backlash came from cryptocurrency stakeholders like Square, Coinbase, and RibbitCapital, who were part of a group of entities to connect to. a common letter fill in the gaps in the bill and encourage alternatives.

The debate on who should be exempt from financial reporting

In response to criticism, Sens. Cynthia Lummis (R-WY), Ron Wyden (D-OR) and Pat Toomey (R-PA) proposed an amendment to the tax provision of the bill that would restore protections for individual investors. The amendment frees entities – including miners, software developers, and protocol developers – from the need to report data that it would be difficult or impossible for them to collect. More specifically, if passed, the amendment would exempt brokers from the following reporting requirements:

“(A) validate distributed ledger transactions (B) sell hardware or software whose sole function is to enable a person to control the private keys that are used to access digital assets on a distributed ledger, or (C) develop digital assets or their corresponding protocols by other persons, provided that such other persons are not clients of the personal development of such assets or protocols.

And then there is the amendment proposed by the senses. Mark Warner (D-VA), Rob Portman (R-OH) and Kyrsten Sinema (D-AZ), who is also supported by the White House. The Warner-Portman-Sinema Amendment would exempt traditional cryptocurrency miners who participate in cumbersome “Proof of Work” (PoW) systems like Bitcoin and Ethereum 1.0 from the financial reporting requirements outlined in the tax provisions. However, it would maintain the reporting requirements for those who use a ‘proof of stake’ (PoS) system used by many altcoins (cryptocurrencies other than Bitcoin), which is less energy intensive and gives mining power based on the. percentage of coins held by a minor.

Currently, only altcoins (any cryptocurrency other than Bitcoin) use PoS systems, which further disadvantages their users if the Warner-Portman-Sinema Amendment were to pass. From a legislative point of view, however, this option may be more attractive and enjoys greater administrative support.

White House press secretary Jen Psaki praised the Warner-Portman-Sinema amendment because the administration believes it “strikes the right balance and takes an important step forward in promoting tax compliance ”. Treasury Secretary Janet Yellen spoke to lawmakers on Thursday about concerns over the Wyden-Loomis-Toomey Amendment, implying that they should support the Warner-Portman-Sinema Amendment instead, according to the Washington Post .

This split between supporters of the two amendments led to a more public rebuke of the Warner-Portman-Sinema Amendment by one of the authors of the Wyden-Loomis-Toomey Amendment. “While I appreciate that my colleagues and the White House acknowledged that their original crypto tax had flaws, the Warner-Portman Amendment chooses winners and losers based on the type of technology used,” Toomey tweeted. “The Warner-Portman plan exempts bitcoin miners, but not other transaction validators or software developers who create these platforms.”

Some experts believe the conflict over the amendments completely misses the difficulty of regulating cryptocurrency. Writing for Coindesk, Angela Walch, associate researcher at the UCL Center for Blockchain Technologies, recommended lawmakers treat cryptocurrency as a separate issue rather than cramming it into a major expense bill.

“Just because policymakers and regulators have allowed [the crypto financial system] reaching its current state largely unchecked does not mean that rapid and piecemeal regulation is the best way to remedy the situation, ”she wrote.

Talks continue as the Senate struggles to pass an infrastructure bill that has already been hampered in the past by party differences. Given the chorus of voices from across the political spectrum speaking out on cryptocurrency, the infrastructure bill seems like more of a start than the last word on the future of how the United States s ‘attack on crypto.