The cryptocurrency lobby is a major new climate enemy

The US Senate on Tuesday approved the low $ 1 trillion bipartisan infrastructure package after weeks of negotiations. He will now travel to the House of Representatives for final approval. At the end of the bill are provisions on cryptocurrencies that have become a major sticking point in the final hours of Senate negotiations.

If the language is finalized, the legislation will impose new tax reporting requirements on cryptocurrency transactions. Congressional accountants estimate these could generate around $ 28 billion in revenue over 10 years.

These provisions have been respected massive opposition of the cryptocurrency lobby, showing how powerful the sector has become. Crypto advocates argue that the measure is too broad because if passed, it will apply to “anyone who (for consideration) is responsible for regularly providing any service performing digital asset transfers on behalf of ‘another person’, potentially including so-called ‘miners’ and software developers. Casting such a wide net, they say, would stifle the industry and push it overseas.

But maybe crypto should to be suffocated because it’s an absurdly energy-intensive industry. A March study found that by the end of the year bitcoin mining could use almost as much energy as all the data centers in the world put together.

“The biggest cryptocurrencies, the biggest being Bitcoin and the second being Ethereum right now, together consume (…) 1% of the world’s electricity consumption right now,” Alex de Vries, who heads the Bitcoin Energy Consumption Index and study author for March, said. “It is enormous.”

The crypto lobby is a force

The cryptocurrency lobby has fought tooth and nail to remove these provisions from the infrastructure bill. Lobbyists have called on thousands of crypto supporters, including Kiss bassist Gene Simmons and Trump-era banking regulator and current crypto chief Brian Brooks to speak out against the networks bill social, Politico reported. Even Jack Dorsey, CEO of Twitter and payments company Square, was moved: he tweeted that the infrastructure bill was “impractical”.

Prior to the passage of the Senate Infrastructure Bill, two amendments that would have limited the provisions, both from bipartisan groups of senators, emerged. The one that de Vries found particularly disturbing was suggested by the senses. Mark Warner, Rob Portman and Kyrsten Sinema, who have reportedly not only restricted the language to exempt more cryptocurrency players from tax reporting obligations, but also restricted a form of crypto mining known as proof of stake.

Currently, most of the crypto industry relies on another type of blockchain, known as proof of work, in which miners’ computers rush to solve complex puzzles. This rewards those with the most powerful computers, which is why bitcoin transactions use enough energy to power 330 homes in one hour. But the new model, proof of stake, would allow miners to certify new blocks by placing a certain amount of crypto as collateral. The system allows a single machine with the highest stakes to have the ability to solve a calculation rather than having all mining machines compete against each other, allowing people to mine or validate transactions in bulk depending on the number of coins they hold, not processing power. they have. This rewards those with the highest stakes rather than those with the most computing power, and thus makes transactions faster and much more efficient.

“The power consumption of a system based on this alternative is 99.95% less than that of a system based on proof of work,” said de Vries, noting that due to concerns about consumption energy, Ethereum, the second largest crypto in the world, said it is launching a coin, Ethereum 2.0, based on a proof-of-stake model.

The Warner-Portman-Sinema Amendment would have exempted miners and developers of crypto wallets who use the proof of work template tax provisions, which, from a climate point of view, would be a terrible gesture. Despite this, the Biden administration congratulated Proposal.

A second amendment, proposed by the senses. Cynthia Lummis, Ron Wyden and Pat Toomey, was also blocked by the Senate on Tuesday. Friday, before it was blocked, the Washington Post reported that Biden’s Treasury Secretary Janet Yellen was lobbying against it, but a crypto enthusiast, including Twitter’s Dorsey, tweeted in his favour. This amendment would also have limited the scope of the tax provisions even more than the Warner-Portman-Sinema proposal, but not in a way that would stifle proof-of-stake mining. This was not incorporated into the text of the law approved by the Senate.

The cryptocurrency lobby has passed $ 2.4 million in 2021 by defending its interests. Although he ultimately did not succeed in limiting the wording of the infrastructure bill, he will have another chance to do so when the House proposes its own amendments.

“This has certainly been a wake-up call for crypto,” Kristin Smith, executive director of the Blockchain Association, a crypto lobbying group, says Politico. “But on the other hand, I think Washington is starting to see that crypto is more of a force than anyone ever anticipated.”

We need more regulation

If enacted as is, the wording of the infrastructure bill could in theory reduce the carbon footprint of the crypto industry by dissuading people from buying bitcoin or other cryptocurrencies. for fear of losing tax money, thus depressing the overall market. Some cryptocurrency brokers already report transactions to the IRS, but most don’t.

Still, de Vries doesn’t think it’s going to be enough of a deterrent to have so much of an impact, so depending on that depressed demand, a totally insufficient way to crack down on industry emissions.

“I think people will always buy cryptocurrency,” he said. “I don’t see it having as much of an effect.”

De Vries said the infrastructure bill may not be the right place to do it, but it’s clear the government should impose more regulations on crypto. This is all the more true as China has been severely on the industry, leaving many looking for a new nation to settle down.

The current wording of the infrastructure bill would constitute the strictest federal regulation on the industry to date and could open the door to more stringent regulation. Government officials are interested in imposing restrictions: Last week, Gary Gensler, chairman of the Securities and Exchange Commission, asked Congress to extend the authority of one’s agency to regulate the cryptocurrency industry. But if the crypto lobby has shown us anything over the past week, it’s that it’s going to push back regulation, no matter the cost, damn the planet.

---

Clarification: The caption of this article incorrectly stated that cryptocurrency lobbyists spent “millions” lobbying against the wording of the infrastructure bill. While the cryptocurrency lobby has would have spent $ 2.4 million in 2021 so far, the exact amount spent on this specific law is not currently known.