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Ongoing efforts to pass a bipartisan infrastructure bill could reshape the cryptocurrency world, as lawmakers debate new tax reporting requirements on various parts of the blockchain system. The Washington Post reports that on Thursday, Treasury Secretary Janet Yellen directly pressured lawmakers to maintain stricter cryptocurrency tax provisions in the infrastructure bill.
It’s a sign of the White House’s commitment to integrating cryptocurrency into the broader tax reporting system, even as details of the new requirements threaten to upset the delicate political balance of the infrastructure plan.
Early on, the drafters of the bipartisan infrastructure framework hoped to offset the rush in new spending with $ 28 billion in new cryptocurrency taxes (collected over 10 years). Overall, the tax proposals were not controversial, but it was extremely difficult to agree on the details of who will bear the burden of reporting transactions.
The original text of the bill released on Saturday imposed a new general requirement on cryptocurrency brokers to report transactions as part of their income tax returns, similar to existing requirements for trading in conventional assets. But the original text left the definition of a “broker” vague, potentially extending to wallet developers or miners.
An amendment of the Senses. Ron Wyden (D-OR), Cynthia Lummis (R-WY) and Pat Toomey (R-PA) would explicitly exempt minors from any reporting requirement, but the amendment has yet to pass. More recently, a group of lawmakers led by Senator Mark Warner (D-VA) proposed a slightly tougher compromise, which gained more support in Congress but left many cryptocurrency advocates uncomfortable. . In particular, advocates fear that the uneven reporting requirements in the Warner Amendment could lead to a lasting split between different blockchain technologies.
Most cryptocurrencies still rely on proof-of-work blockchains like Bitcoin, which require energy-intensive mining to certify new entries on the blockchain. But a new blockchain model would allow miners to certify blocks by staking a certain amount of currency (hence “proof of stake”), thus enabling faster and more complex transactions. Proof-of-stake blockchains are still less popular, but some bigger coins (notably Zcash) are actively considering switching to the new mode. Ethereum is in the process of launching its own staked blockchain, called Ethereum 2.0 or ETH2.
The Warner Amendment defines the term “broker” to include proof of stake minors but not proof of work minors, due to the additional complexity and financial flexibility of operating proof of stake. But cryptocurrency groups fear the additional regulatory burden will push coins away from proof of stake systems, stifling new innovation before it has a chance to take hold.
“The wording of the new amendment enshrines one of many competing technologies in the law,” said Neeraj Agrawal of Coin Center. The edge. “It is the government that chooses a winner in an otherwise competitive field. And worst of all, a tech policy of this magnitude comes like a last-minute tax provision buried in a massive, must-have infrastructure bill. It is not a way of playing politics.
The split is particularly confrontational given the intense energy demands of mining proof of work, a long-standing sore point for the cryptocurrency that many hoped proof-of-stake systems would fix. In a tweet Thursday night, Senator Wyden criticized the Warner Amendment from a climate policy perspective, calling it “a government-approved haven for the most climate-damaging form of crypto technology.”
Most Bitcoin groups, including Coin Center, are now pushing for the Wyden Amendment to be the least damaging option, despite lobbying from the White House. “This will not happen without your elected representatives hearing from you. ” said Brian Armstrong, CEO of Coinbase on Twitter. “Please contact your senators and ask them to support the amendment.”
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